The report analysed China's public balance sheet and found that its general government net financial worth has deteriorated in recent years to about 8 per cent of GDP, largely because of subnational borrowing and underperforming public corporations.
The IMF expects the USA economy to grow 2.9 percent this year, the fastest pace since 2005 and unchanged from the July forecast.
The latest IMF "World Economic Outlook" report released at the IMF-World Bank Annual Meetings in Bali on Tuesday hints at possible further negative shocks to growth prospects.
Trump had blamed "crazy" Fed policies for contributing to current financial market turmoil as a global sell-off continued amid stronger signs of rising financial volatility which the International Monetary Fund and the World Bank were scheduled to address during their annual meetings.
According to a media report, State Bank of Pakistan had viewed that the exchange rate of Rs137 to a dollar by the end of current fiscal year in June 2019 would be sufficient to address the challenges.
The rapid build-up in debt in China in recent years also is a concern, although Chinese authorities have taken steps to rein in debt growth, he said.
The IMF said the high downside risks in the medium-term are driven by relatively elevated United States interest rates, a strong U.S. dollar and a strong global risk appetite, which "tends to boost portfolio flows in the near term but foreshadows weaker inflows in the medium term". With record exports to China, the US and Germany all helping grow the overall value of Swiss exports by 4.8 billion Swiss francs (€4.1 billion) since the first quarter of 2017.
The downgrade reflects a confluence of factors, including the introduction of import tariffs between the USA and China, weaker performances by euro zone countries, Japan and Britain.
The growth rate of United States for 2018 is 2.9 per cent and that of 2019 has been powered to 2.5 per cent.
"We are all deeply concerned about this news and the potential impact on the business. Our probability that we would attach to further bad news has gone up", Obstfeld said. It predicted China's GDP growth at 6.6% in 2018-'19 and downgraded it to 6.2% for 2019-'20.
China, however, could still be labelled a currency manipulator if the US Treasury decides to rely more heavily on the older 1988 Act, which allows for a more subjective assessment of whether a currency is being manipulated to gain unfair competitive advantage in trade.
It also assumes that Trump imposes a 25% tariff on imported cars and auto parts imports.
He contended that China had "already retaliated" against his tariff increases.