IMF urges China to reinvent itself to turn economy around

China needs to “reinvent itself” with economic policies to speed resolution of its property market crisis and boost domestic consumption and productivity, the IMF’s MD, Kristalina Georgieva, said on Sunday.

“China faces a fork in the road: rely on the policies that have worked in the past, or reinvent itself for a new era of high-quality growth,” Georgieva said in remarks to a meeting of senior Chinese officials and global executives.

Officials who spoke at the opening of the China Development Forum expressed confidence that China would hit its economic targets, including growth of 5% this year, and pledged further support for companies in strategically important sectors, which President Xi Jinping has dubbed “new productive forces”.

But those commitments stopped short of the more sweeping changes urged by the IMF. Georgieva said an analysis by the IMF showed a more consumer-centred policy mix could add $3.5-trillion to China’s economy over the next 15 years. If achieved, that boost would be equivalent to adding output more than double the size of South Korea’s economy.

To do that China would need to take “decisive” steps to complete unfinished housing stranded by bankrupt developers and to reduce risks from local government debt, the IMF chief said.

“A key feature of high-quality growth will need to be higher reliance on domestic consumption,” said Georgieva.

“Doing so depends on boosting the spending power of individuals and families.”

INVESTMENT

Other economists have also urged a new growth model for China. But the IMF remarks were significant in coming at the outset of a two-day meeting where Beijing is looking to push the message China is open for business.

Foreign investment flows into China shrank nearly 20% in the first two months of the year, data released Friday showed, and officials have been stepping up efforts to attract investors at a time when many companies have been looking to “de-risk” supply chains and operations away from China.

In 2023, foreign direct investment into China contracted by 8%, reflecting a shaky economic recovery and tensions with the US and its allies on a range of issues.

Apple CEO Tim Cook, the highest-profile executive at the Beijing event, told China state broadcaster CGTN he had an “outstanding” meeting with China’s Premier Li Qiang.

“I think China is really opening up,” Cook told a CGTN interviewer on the sidelines of the meeting. He later said Apple’s Chinese-based suppliers had helped deliver gains in more sustainable manufacturing, including lowering water use and recycling metals like aluminium and cobalt.

FORCES

More than 100 overseas executives and investors were attending the China Development Forum and a series of smaller closed-door sessions with officials on Friday and Saturday.

Other officials highlighted Xi ’ s commitment to drive investment in “new productive forces,” industries that officials have said includes networked electric vehicles, space flight and cutting-edge drug development.

100 more than 100 executives and investors from around the world attended the China Development Forum