IMF: China’s economic recovery on target
The International Monetary Fund said China’s economic activity has recovered broadly in line with the authorities’ growth target of around 5 percent. It projected China’s GDP growth to be 4.6 percent this year, an upward revision of 0.4 percentage points from the IMF’s forecast in the October 2023 World Economic Outlook, or WEO.
On the projected 4.6 percent growth, Sourabh Gupta, a senior fellow at the Institute for ChinaAmerica Studies, said it is “reasonable” but “slightly on the lower side” in his estimation.
“I expect the final number to come in closer to 5 percent on the back of greater public sector investment, which would also be near the government’s growth target,” Gupta told China Daily.
China will grow because it enjoys robust private-sector growth engines, such as in the electric vehicles, environmental goods, advanced manufacturing, and platform economy sectors, he said. “This is evident in the healthy private fixed asset, minus property, investment numbers, which are surging at a double-digit pace and cushioning the blow from the contraction in real estate investment.”
“Longer-term, this also bodes well for the sustainability of macroeconomic growth once the shakeout in the property sector restores residential fixed investment growth to an equilibrium more in tune with fundamentals. The shakeout could be a protracted one, though. This is especially so given that economic growth in the advanced economies is expected to soften this year.”
The executive directors welcomed China’s strong post-pandemic recovery while noting that the adjustment in the property market and strains in local government public finance will continue to weigh on private investment and consumer confidence, according to the IMF report published on Friday.
Efforts welcomed
The directors welcomed the authorities’ efforts to contain risks from the property market and underscored the need for additional measures in a comprehensive, well-sequenced strategy to facilitate a smooth transition of the property sector to a new equilibrium, the report said.
They highlighted China’s role in advancing multilateral economic cooperation and welcomed its support for sovereign debt restructuring in low-income and vulnerable countries and tackling the global climate crisis.
Zhang Zhengxin, IMF executive director for China, issued a statement dealing with some of the concerns as part of the review.
Zhang said the IMF’s forecast for the real estate market was “too pessimistic” to some extent. The property sector, he said, had been “stabilizing and recovering, and its downward impact on the economy will continue to reduce gradually”.
China “has always fully complied with our agreements and commitments to the IMF on data disclosure and provision”, he said.
On China’s trade with others, Gary Hufbauer, a senior fellow at Peterson Institute for International Economics in Washington, said that as long as China remains a reliable supplier, this trade will expand.
“China has the advantage of offering high-quality components and finished goods at reasonable prices,” Hufbauer told China Daily.