Although the global economy is recovering, Lagarde said, growth is still “fragile” and “faces some downside risks”. She noted that Chinese stocks have still appreciated significantly over the last year, even after dropping nearly 27 percent since June 12. “It’s a relatively young market, and it’s an element of a learning curve, both by the market players…and by the authorities as well”.
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Turning to the euro zone, Lagarde said the area is “beginning to turn the corner” despite Greece worries.
WASHINGTON-The head of the global Monetary Fund on Wednesday backed Chinese efforts to stem recent market volatility and down played the signals that turbulence might be sending about the broader economy.
“We have more upbeat forecasts that we’ve had in a long time”, she said.
In an effort to bolster consumer confidence and prevent soured loans backed by equities from infecting the financial system, China banned large shareholders from selling stakes, ordered state-run institutions to buy shares and let more than half of the companies on mainland exchanges halt trading.
Greece remains a major issue in the eurozone issue, Lagarde said, but progress was being made. Chinese officials assured the lender that the measures should be considered temporary, the person said.
She also pointed out that the turmoil would not interrupt work toward eventually including China’s renminbi in the elite currencies underpinning the IMF’s special lending currency, the SDR. Inclusion of the yuan would be a prestigious milestone for China, but a final decision is still pending.
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“What will be critical, in my view, is what the Greek authorities actually are prepared to do-not the words around it, not the political noise that is often a necessity”, she said.
