The International Monetary Fund (IMF) has advised China that it must ‘reinvent itself’ through economic policies capable of resolving its property market crisis and boosting domestic consumption and productivity.
So says IMF MD Kristalina Georgieva.
Reuters quotes Georgieva, a Bulgarian economist, as saying: ‘China faces a fork in the road — rely on the policies that have worked in the past, or reinvent itself for a new era of high-quality growth.’
She was addressing a meeting of senior Chinese officials and executives from global companies.
Georgieva said an analysis by the IMF showed that a more consumer-centred policy mix could add $3.5-trillion to China’s economy over the next 15 years.
To do that, China would need to take ‘decisive’ steps to complete unfinished housing stalled by bankrupt developers and reduce risks from local government debt, she said.
‘A key feature of high-quality growth will need to be higher reliance on domestic consumption. Doing so depends on boosting the spending power of individuals and families’, she said.
According to Reuters, the IMF remarks were significant in coming at the outset of a two-day meeting where Beijing is looking to push the message that China is open for business.
Foreign investment flows into China shrank nearly 20% in the first two months of the year, according to data released last week, and officials have been stepping up efforts to attract investors at a time when many companies have been looking to ‘de-risk’ supply chains and operations away from China.
Reuters reports that, in 2023, foreign direct investment into China contracted by 8%, reflecting a shaky economic recovery and tensions with the US and its allies on a range of issues.