WASHINGTON, Sept 15 (Reuters) – The International Monetary Fund has urged China to boost sluggish domestic consumption, address its troubled real estate sector and improve local government governance, which is holding back growth in China and the world. IMF Managing Director Cristalina said she would direct the government to rein in debt. Georgieva told Reuters.
Georgieva said in an exclusive interview that this message will be conveyed to Chinese authorities during the upcoming IMF Article IV review of China’s economic policy. The fund will urge the Chinese government to shift its growth model away from debt-driven infrastructure investment and real estate, he said.
“Our advice to China is to use policy space to shift its growth model towards increasing domestic consumption,” Georgieva said. “Because in this current environment, traditional infrastructure methods of injecting more capital are not productive.”
China’s aging population and declining productivity, along with American and European companies relocating their supply chains out of China, were playing a “suppressing role” in growth. Georgieva said problems in China’s real estate sector were also causing consumers to hold back on spending.
“In fact, we predict that without structural reforms, China’s medium-term growth rate could fall below 4%,” Georgieva said.
In July, the IMF predicted China’s growth rate would be 5.2% in 2023 and 4.5% in 2024, but warned that growth could be even lower when real estate contraction is taken into account.
Georgieva also said that it is important for China to address consumer confidence in the real estate sector by financing the completion of apartments that buyers have already paid for, rather than bailing out troubled developers. said it was important.
Global growth in anemia
The IMF is preparing to release new global growth forecasts ahead of the IMF-World Bank Annual Meetings from October 9th to 15th. Georgieva said the agencies would decide separately on Monday whether to continue meetings in earthquake-hit Morocco.
The new forecast is expected to reflect concerns about poor GDP growth around the world, as most large economies are still growing below pre-pandemic rates.
The United States is the only large economy to return to pre-pandemic growth, while China is 4 percentage points below pre-pandemic trends, Europe is down 2 percentage points and the world is down 3 percentage points.
China has generated about a third of global growth this year, and its growth rate is “important for Asia and important for the rest of the world,” Georgieva said.
Asked about recent comments by U.S. Secretary of Commerce Gina Raimondo that some U.S. companies consider China a “non-investment destination,” Georgieva said: “There is also an outflow from China. We will be monitoring this closely. “These are trends that need to happen and how they change over time.”
He added that there are some areas that remain attractive to investors, such as the digital economy and green technology.
He warned that it was important to ensure that China’s big push for electric vehicles was not done through the use of subsidies in a way that created unfair competition.
Reporting by Andrea Shalal and David Lawder.Editing: Chris Rees and Tom Hogue
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