China’s economy is projected to expand by 5.4% this year before decelerating to 4.6% in 2024, amid a sluggish real estate sector and dwindling international demand.
This is what the International Monetary Fund (IMF) said today.
The forecasts for both this year and next are better than before. Last month, the IMF thought China would grow by 5% in 2023 and 4.2% in 2024.
The IMF reviewed China’s economy. They said China did better than expected in the last part of the year. The government also made new policy announcements.
In the future, China’s growth will slowly go down. By 2028, it might be around 3.5%. This is because of low productivity and more older people.
In recent years, China has grown because it borrowed a lot of money. This led to big imbalances.
People save too much money and used it for investments that don’t make as much money anymore.
This caused a lot of debt, the IMF’s Deputy Managing Director, Gita Gopinath, said today.
Regarding the housing market, the IMF likes the government’s plans. But the challenge is to avoid economic costs and keep the financial system stable.
More is needed for a faster recovery and to cut costs during this change. The IMF says China should stop supporting failing businesses.
They should let house prices change more. They should spend government money to finish buildings that aren’t done.
And they should help companies that can survive to fix their finances.
Risks Are Still Growing
Also, Gopinath asked Beijing to change how it handles money and fix its accounts. This is to deal with local and regional governments’ debt problems.
They owe a lot of money, often through unofficial ways known as LGFV.
The IMF thinks these semi-public groups owe about 9 trillion dollars. That’s more than twice as much as in 2017.
The financial risks are high and getting higher. Banks have less money saved up and face more risks with the money they’ve lent, Gopinath warned.
The IMF says Beijing should use better economic policies to boost activity. This includes spending more government money on people.
They should also lower interest rates and let the value of their money, the yuan, change more freely.
Lastly, Gopinath wants China to show it supports international trade. They should help to reduce tensions by trading and investing more fairly.
They should cut down on trade barriers and not follow national policies that are too strict.
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