Interview: IMF official says higher and more resilient growth for Chinese economy “within reach”

by Xinhua writer Xiong Maoling
WASHINGTON, Aug. 2 (Xinhua) — Despite various challenges, higher and more resilient growth for the Chinese economy is “within reach” with continued comprehensive reforms, an International Monetary Fund (IMF) official has said.
The IMF expects China’s gross domestic product (GDP) to grow by 5 percent in 2024 and 4.5 percent in 2025, “supported by strong public investment and an ongoing recovery in private consumption,” Sonali Jain-Chandra, IMF’s Mission Chief for China, told Xinhua in a written interview.
The IMF released the final report for China 2024 Article IV consultation on Friday. Every year, an IMF staff team visits the country to collect economic and financial information and discuss with officials the country’s economic developments and policies.
Noting that China’s central government has stepped up measures to address the stress in the property sector, which are “welcome,” Jain-Chandra said that further policy effort is needed to ensure a more efficient and less costly transition for the property sector.
The IMF recommends increasing central government funding to protect homebuyers of unfinished pre-sold housing, including for completion, which would also pave the way for the exit of nonviable developers, she said.
In addition to the property sector support, the IMF also suggests that Chinese authorities provide adequate macroeconomic support to boost domestic demand and mitigate downside risks, such as measures of greater fiscal support for households, looser monetary policy, and a more flexible exchange rate.
The IMF official noted that over the last several decades, China has registered “impressive growth,” facilitated by market-oriented reforms, trade liberalization, and greater integration into global supply chains.
“High growth has translated into impressive gains on various social metrics, including the eradication of extreme poverty,” Jain-Chandra said.
In recent years, she noted, China stands out as a technological leader in several sectors, including sectors important for the climate transition and high-tech sectors.
Jain-Chandra said that the IMF welcomes the focus of the recently concluded third plenum of the 20th Communist Party of China (CPC) Central Committee, including further opening-up in both trade and investment, the need for enhanced macro risk management of local government debt, property sector, and small and medium financial institutions-sized banks, as well as the expansion of the service sector.
“We look forward to the formulation and publication of further implementation details of the stated high-level policies,” said the IMF official, adding that concerted structural reforms in China will benefit both China and the world.
In the medium term, Jain-Chandra said, the Chinese economy is confronted with challenges including an aging population and slowing productivity growth. Despite these challenges, the IMF thinks that higher and more resilient growth is “within reach,” she said.
The IMF estimates that a comprehensive package of market-based structural reforms, enhancements to the social safety net, and pension reforms can raise the GDP level by close to 20 percent by 2037 relative to the baseline.
Looking ahead, Jain-Chandra noted that China’s service sector is an underexploited growth driver.
“The reallocation of resources to services has helped boost productivity over the past two decades, as firms in certain service sectors have been highly innovative,” she said.
She noted that the sector can continue to drive growth in coming years if supporting reforms are implemented.
One priority in pursuing reforms should be to improve the allocation of capital and labor in the service sector, and another priority is to rebalance the economy towards consumption from investment and strengthen the demand for services, she said.
The IMF official also said that the multilateral organization supports an open rules-based trading system, which has been critical for global economic growth and stability over the past few decades.
In recent years, there has been a noticeable increase in trade restrictions, with countries imposing around 3,000 trade restrictive measures in 2023, up from around 1,000 in 2019, she noted.
“We encourage countries to work within the WTO-based multilateral framework to address the underlying concerns that are exacerbating trade tensions,” she said, referring to the World Trade Organization.
“Underpinning these efforts is the need to strengthen and modernize the trading system, including strengthening rules in areas like agricultural and industrial subsidies, and ensuring effective dispute settlement,” she said. ■