IMF sees signs China stabilising, says reforms can boost medium-term growth

THE International Monetary Fund (IMF) said on Thursday (Sep 28) it sees some signs of stabilisation in China’s economy from recent data, but believes the country can accelerate growth over the medium term if it takes steps to reform its economy to rebalance from investment towards consumer spending.

Chief spokesperson Julie Kozack told a regular news briefing that the IMF still believes China can achieve around 5 per cent growth this year, with detailed projections due when the IMF publishes its World Economic Outlook during IMF-World Bank annual meetings in Marrakech, Morocco on Oct 10. The Fund sees China’s GDP growth slowing to about 3.5 per cent over the medium term, but this can be accelerated with economic reforms, she added.

The IMF view is roughly in line with private forecasters as China’s recovery from Covid-19 lockdowns falters and a massive downturn in its property sector weighs on consumer demand. There is also a debt overhang from a decades-long infrastructure binge and depressed private firms have been reluctant to invest. Some analysts see growing risk that China will drift into an era of Japan-like stagnation with an ageing population and slowing productivity growth.

China’s slowdown has some government advisers in Beijing calling for deeper reforms, while others are advocating more robust state spending to bolster growth

Kozack said that after a major slowdown since the first quarter of 2023, “very recent data has been a bit more mixed with some signs of stabilisation”.

“We expect that China’s growth will slow to around 3½ per cent against the backdrop of demographic headwinds and slowing productivity growth,” Kozack said.

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“But we also think that higher growth over the medium term is within reach for China. China should seize the opportunity to rebalance its economy to short-term macroeconomic policy support and medium-term reforms.” REUTERS