The International Monetary Fund (IMF) on Wednesday raised China's economic growth forecast for 2024 to 5 per cent, up from its previous estimate of 4.6 per cent. However, the IMF cautioned that growth is expected to decelerate to 3.3 per cent by 2029 due to demographic shifts and slower productivity growth, urging China to implement reforms to enhance productivity.
The revised 5 per cent growth target aligns with the Chinese government's goals for the world's second-largest economy, which is currently facing significant challenges from a 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," said Gita Gopinath, the IMF's First Deputy Managing Director, following the IMF's annual review of China's economic policies.
The Chinese economy saw a 5.3 per cent growth in the first quarter of the year despite the property market downturn and weak domestic demand. Gopinath attributed the 0.4 percentage point upward revision for both 2024 and 2025 to strong first-quarter GDP data and recent policy measures.
China's property sector has been a significant part of its economy but is now facing a crisis. Earlier this month, China announced a plan to address the sector's issues by allocating billions to buy back unsold homes and repurchase idle land. The People's Bank of China has set up a 300-billion-Yuan (about $42.25 billion) re-lending facility for government-subsidised housing projects.
Gopinath stressed the importance of continuing the housing market correction to steer the sector towards sustainability. The IMF's review of China's economy precedes the upcoming Communist Party of China plenum, which will discuss measures to boost the country's economic outlook.
For China to achieve high-quality growth, a key focus of President Xi Jinping, Gopinath highlighted the need for structural reforms to address economic imbalances. "Key priorities include rebalancing the economy towards consumption by strengthening the social safety net and liberalising the services sector to boost growth potential and create jobs," she said.
Gopinath also acknowledged China's role in restructuring the debt of several smaller countries and expressed the IMF's hope for continued cooperation with Chinese authorities in this area.
The Communist Party's political bureau recently announced the delayed plenum will be held in Beijing in July. In a rare admission, the party, led by President Xi Jinping, acknowledged a grim economic outlook due to insufficient demand and an uncertain external environment.
Gopinath also addressed concerns from the US, EU, and other global players regarding China's overcapacity in the manufacturing sector, particularly in electric vehicles. She urged Beijing to scale back such policies to address these concerns.