Chinas economic growth is graduallyslowing as the structural transformation of the economycontinues. Output grew by 7.7 percent in 2013, matching its2012 growth rate and exceeding the governments 7.5 percentindicative target. In recent months economic activity,including industrial production, started to show signs ofacceleration. The recent acceleration, expected to continueinto the next two quarters, is partly reflecting the effectof new growth-supporting measures, robust consumption, and arecovery of external demand. Chinas growth will continue tomoderate over the medium term, and the structural shiftswill become more evident. Growth in China is expected todecrease marginally to 7.6 percent in 2014 and 7.5 percentin 2015, from 7.7 percent in 2013. Fiscal and financialsector reforms are needed to address financial stabilityrisks in the medium run. The first task involves effectivelymanaging the process of rapid credit growth, including lesswell-regulated shadow banking system. The second involvesgradual and orderly deleveraging of large stock of localgovernment debt accumulated through off-budget andquasi-fiscal platforms.
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