In 2022the expansion was only 3%he lowest annual growth since the 1970snot counting 2020 marked by the pandemic.
Consumer inflation in China grew slightly in December 2022, reaching 1.8% year-on-year inflation, according to official figures released by the National Statistics Office (ONE).
“This is good news for China and also for the world as now its economy is expected to contribute a quarter of global growth this year“said the economist of the IMF’s Asia-Pacific Department, Diego Cerdeiroand the head of the mission of the Fund for China, Sonali Jain Chandra in a post on the agency’s blog.
China’s role in global growth is such that, if the growth rate grows by 1 percentage point, those of the other countries do so by 0.3 percentage points, according to recent Fund calculations.
Despite these better prospects, the Asian country still faces great challenges economic and, against this, for the IMF monetary and fiscal support is needed, along with “structural reforms“.
Specifically, the IMF identifies the sector real estate -one of the largest items in the Chinese economy that has been in crisis for three years and represents a quarter of its economy- as one of the biggest “headwinds” for growth.
In the same terms, The Fund warns of the uncertainty of the evolution of the Coronavirus in the country, and, in the long term, by population contraction and slowdown in productivity growth.
In fact, the IMF predicts that, in the absence of reforms that boost productivity, China’s annual growth will fall below 4% in the next five years.
“The economy needs comprehensive macroeconomic policies and structural reforms to ensure recovery and promote balanced, green and inclusive growth”, stressed the economists.
For now, for this year, the IMF recommended a neutral fiscal policywith accommodative monetary measures -such as low rates– to ensure recovery, taking advantage of the absence of inflationary pressures and growth that is below potential.
Regarding the market propertiesadvised a “orderly restructuring” from real estate firms with debt problems, in order to reduce risks, as well as the introduction of a property tax and funds to finish unfinished buildings.
Meanwhile, in the long term, the reforms must have, as one of their axes, a increase in household consumption and local demand.
“Reforms as gradually raise the retirement age to increase the labor force, reinforce the unemployment and health insuranceand reorganizing state companies to reduce the productivity gap with private ones could significantly boost growth in the coming years and increase the level of income by approximately 2.5% in five years,” the IMF explained in its publication.
On fears that the reopening of China would imply pressure on inflation in the rest of the world, the impact – for the agency – would be “limited”.
The increased import pressure from China in the coming months it will be in the services and not on goods, Thomas Helbing, director of the Asia-Pacific Department said in China’s Article IV periodic review that was also published today.
Source: Ambito
