IMF upgrades China growth forecasts on recent economic measures

SINGAPORE (ICIS)–The International Monetary Fund (IMF) has upgraded its 2023 growth forecast for China to 5.4% from 5% previously, in view of recently introduced government measures aimed at strengthening the world’s second-biggest economy.

Next year, China’s economic growth is projected to slow to 4.6% – revised up from an earlier projection of a 4.2% expansion – “amid continued weakness in the property sector and subdued external demand”, IMF first deputy managing director Gita Gopinath said in a statement on 7 November.

“The authorities have introduced numerous welcome measures to support the property market, but more is needed to secure a quicker recovery and lower economic costs during the transition,” Gopinath said.

China’s massive property sector, which makes up a third of its GDP, is persistently facing falling prices and sales, as well as loan defaults by major developers.

“A comprehensive policy package should include measures to accelerate exit of nonviable property developers, remove impediments to housing price adjustment, allocate additional central government funding for housing completion, and assist viable developers to repair balance sheets and adapt to a smaller property market.”

China in late October approved a yuan (CNY) 1tr ($138bn) sovereign bond issue to permit local governments to frontload part of their 2024 bond quotas which should boost economic activity.

The funds will be utilised in eight major areas, including rebuilding disaster-hit areas, key flood control projects, natural disaster emergency capacity improvement, and urban drainage and waterlogging prevention and control, according to state news agency Xinhua.

Over the medium term, China’s growth is projected to gradually decline to about 3.5% by 2028 amid headwinds from weak productivity and population aging, IMF’s Gopinath said.

EXTERNAL HEADWINDS REMAIN
October trade data showed an unexpected rise in imports, while exports contracted for the sixth straight month, with the country’s trade surplus narrowing to $56.5bn from a revised $77.8bn in the previous month.

“The stronger imports including for commodities offer some hopes of continuing domestic demand recovery,” said Ho Woei Chen, economist at Singapore-based UOB Global Economics & Markets Research.

“With base effect more favourable in November-December, we still expect the exports and imports to improve,” Ho said.

Focus article by Nurluqman Suratman

($1 = CNY7.26)

Thumbnail image: At Lianyungang Port in Jiangsu province, east China on 7 November 2023. (By Costfoto/NurPhoto/Shutterstock)