IMF urges China to further recalibrate COVID-19 strategy

SINGAPORE (ICIS)–The International Monetary Fund (IMF) has urged China to further recalibrate its COVID-19 strategy and provide additional support to its beleaguered property sector to mitigate risks from a global economic slowdown.

Following the recovery from the initial impact of the pandemic, the world’s second-biggest economy remains under pressure, with growth projected to slow to 3.2% in 2022, from an 8.1% pace last year, before improving to 4.4% in 2023 and 2024, the IMF stated on 22 November following a review of China’s economic conditions.

Forecasts for 2023 and 2024 were unchanged on the assumption that China’s current zero-COVID strategy will be gradually and safely lifted in the second half of 2023, the IMF said.

“Although the zero-COVID strategy has become nimbler over time, the combination of more contagious COVID variants and persistent gaps in vaccinations have led to the need for more frequent lockdowns, weighing on consumption and private investment, including in housing,” the multilateral institution said.

Going forward, a fine-tuning of China’s COVID-19 strategy should be well prepared and include boosting the pace of vaccinations and maintaining it at a high level, to ensure that protection is preserved, it said.

China is currently grappling spiking COVID-19 cases. For 22 November, its National Health Commission (NHC) reported a total of 29,157 infections nationwide, close to the daily record of 29,411 on 13 April this year.

Recurring COVID outbreaks and lockdowns and ongoing challenges in the property sector remain key risks for China’s economy, it said.

“China’s regulatory tightening in the property sector has added to severe financial strains for developers, leading to a rapid slowdown in housing sales and investment, along with a sharp decline in local government land sale revenues,” the IMF said.

The IMF said that additional robust and well-funded mechanisms in China are needed for completing troubled unfinished housing projects and protecting new pre-sale buyers from the risk of non-completion, while forbearance measures should be phased out.

“These measures will help restore homebuyer confidence and facilitate market-based restructuring,” it added.

The multilateral institution made the assessments following virtual discussions on 2-16 November with senior officials from the Chinese government, the People’s Bank of China (PBoC), as well as private sector representatives, and academics.

Focus article by Nurluqman Suratman

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