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The International Monetary Fund is warning that China is likely to fall into a new cycle of economic stagnation in the near future.
The Chinese Central Bank last week cut its benchmark interest rate for the first time in over two years, cutting interest rates by nearly a third in a bid to revive the economy.
While the bank said it is not in a position to support the yuan or the renminbi against the dollar, it said in a statement that the global financial system will continue to be destabilized.
“China’s economic slowdown could lead to a deepening of the cycle of deepening financial instability, particularly in Europe and the US,” the IMF said in its latest forecast for the global economy.
The IMF said that the economic slowdown in China will continue as the government attempts to revive a faltering economy.
The bank added that the current “crisis” will likely be a “long-lasting, protracted period.”
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