The International Monetary Fund now expects China’s economy to grow 5% this year, raising its forecast from 4.6% a few weeks ago to reflect strong economic expansion in early 2024 and additional government support.
China is targeting growth of around 5% this year. In the first quarter, it recorded a better-than-expected expansion of 5.3%, although a prolonged slump in the housing sector continues to weigh on domestic demand.
“We are certainly seeing that consumption is recovering, but there is still some way to go,” said the Fund’s first deputy managing director, Gita Gopinath, in an interview with Bloomberg News earlier this week. “The strength we see in public investment remains. Private investment is still weak, mainly due to the weakness of the real estate sector.”
The IMF has called on Beijing to provide more monetary and fiscal support to the economy, including new measures to resolve the housing crisis, which has persisted despite repeated efforts by authorities to set a floor on prices and increase demand.
Earlier this month, Chinese authorities announced a new effort to bolster housing markets by easing down payment requirements for buyers and providing 300 billion yuan ($42 billion) of central bank financing to help governments. places to buy excess inventory from developers.
Commercial tensions
The Fund is still evaluating the effects of the tariffs recently announced by the United States on China, according to Gopinath, who said that policies that exacerbate fragmentation are negative for the entire world.
“There have been increased risks to the global trading system and we are seeing early signs of fragmentation,” she said. “Trade between countries that are more geopolitically aligned is holding up better than trade between countries that are less geopolitically aligned.”
Countries also increasingly rely on industrial policies, which can lead to misallocation of resources and create repercussions that affect other trading partners, Gopinath said.
2024-05-29 21:50:29