IMF revises China’s GDP to 5% this year; Growth may decelerate to 3.3 per cent by 2029, Gita Gopinath

IMF revises China’s GDP to 5% this year; Growth may decelerate to 3.3 per cent by 2029, Gita Gopinath
IMF revises China’s GDP to 5% this year; Growth may decelerate to 3.3 per cent by 2029, Gita Gopinath
Beijing, May 29: The IMF on Wednesday projected China’s economic growth at 5 per cent, up from its earlier forecast of 4.6 per cent, but cautioned it of a slowdown to contract to 3.3 per cent by 2029 due to ageing and slower productivity growth and suggested to boost productivity to continue with economic reforms.
The 5 per cent growth revision by the International Monetary Fund (IMF) is in line with the target set by the Chinese government for the world’s second-largest economy which is grappling with a slowdown triggered by the crippling property sector crisis and industrial overcapacity.
“China’s economic growth is projected to remain resilient at 5 per cent in 2024 and slow to 4.5 per cent in 2025,” IMF’s First Deputy Managing Director Gita Gopinath told the media here after the IMF’s annual review of China’s economic policies.
The Chinese economy grew at 5.3 per cent in the first quarter amid the downturn of its property market and subdued domestic demand. “The revisions of 0.4 percentage points for both years compared to the April projections are driven by strong Q1 GDP data and recent policy measures,” said Gopinath, who along with other IMF officials, held meetings with China’s top officials of the finance ministry and Chinese banks to discuss the state of China’s economy.
“Over the medium term, growth is expected to decelerate to 3.3 per cent by 2029 due to ageing and slower productivity growth,” she said.
China’s property sector, the dominant component of the Chinese economy in the last few years, remained on its Achilles heel causing widespread crisis.
Earlier this month after prolonged dithering, China finally moved in to address the near collapse of its mammoth property sector by allotting billions of dollars to buy back unsold homes and repurchase idle lands to resurrect its bankrupt real estate sector, which once constituted the mainstay of its economic growth.
The People’s Bank of China has established a 300-billion-Yuan (about USD 42.25 billion) re-lending facility for the government-subsidised housing project.
Gopinath said, “The ongoing housing market correction, which is necessary for steering the sector towards a more sustainable path, should continue.” The IMF review of the health of the Chinese economy comes ahead of the meeting of the ruling Communist Party of China’s plenum to discuss measures to boost the economic outlook in the country.
Gopinath said achieving high-quality growth, the buzzword of Chinese President Xi Jinping, will require structural reforms to counter headwinds and address underlying imbalances.
“Key priorities include rebalancing the economy towards consumption by strengthening the social safety net and liberalising the services sector to enable it to boost growth potential and create jobs,” she said.
She also highlighted China’s role in restructuring the debt owed by several smaller countries. “The Fund looks forward to continued cooperation with the authorities in this regard,” she said.
The Communist Party’s high-powered political bureau last month announced the delayed meeting of the plenum to be held in Beijing in July. At that time, the party, headed by President Xi Jinping, in a rare admission spoke of a grim economic outlook in the country due to insufficient demand and uncertain external environment.
Steve Barnett, the IMF’s senior resident representative in China, said the plenum should look to continue with economic reforms to boost productivity as it rolls out plans for the next decade.
“If we think of the third plenum as a time to look at medium- and long-term reforms, if I could pick just one [pressing issue to focus on], it’s to boost productivity,” Barnett, who addressed the media along with Gopinath, said.
“The way to do that is to continue with economic reforms.
“And this takes us to things like giving the market a decisive role in the economy – which actually featured prominently for the first time in the 2013 third party plenum – and levelling the playing field between all types of firms – state-owned firms, private firms, foreign firms,” he said.
Gopinath also underlined the US, EU and global concerns over the overcapacity of the Chinese manufacturing sector, especially e-vehicles, which China is pushing in a big way in the global markets bringing down their prices and urged Beijing to scale back such policies. (PTI)