Kristalina Georgieva, the managing director of the International Monetary Fund (IMF), indicated during her Sunday speech at China Development Forum that China must redefine its economic trajectory. Describing China’s current economic situation as a crossroads, she underlined the country’s need to shift from traditional approaches to embracing more pro-market reforms to stimulate growth.
Taking place in Beijing, China’s premier international business conference also featured influential global leaders, including Apple’s Tim Cook, HSBC’s Noel Quinn, and Darren Woods of ExxonMobil.
Georgieva noted that the world economy endured challenges exceptionally well but foresees future growth rates to be weaker than in the past due to low increases in productivity and high debt levels.
The country’s Premier, Li Qiang, pledged at the forum to establish new regulations which would streamline the process for foreign companies to enter the market. He also stressed the importance of stimulating local consumption to uphold economic growth in China.
With global trade partners of China grappling with oversupply problems in major sectors such as steel and electric vehicles, there is a concern that excess inventory will flood international markets.
China’s government previously announced a 5% growth goal for this year, identical to the 2023 target but lower than in the past. Many financial analysts predict further slowing down of the Chinese economy due to factors including a slump in the property market and a decreasing population.
China promised to counteract this by investing more in infrastructure and manufacturing sectors, however, economists are pushing for more strategies to boost domestic consumption.
The IMF director’s statement echoed the Chinese president Xi Jinping’s call for Chinese industries’ advancement into more complex technology and value-added sectors, which he termed “high-quality growth”. Georgieva intimated that China can expand its economy by $3.5 trillion or by 20% over the next 15 years with a comprehensive set of pro-market reforms.
The commencement of China’s ‘Two Sessions’ is set to take place amidst a weakened economy and trade friction with the United States and European Union. Actions such as tackling the remnants of the housing crisis, by decreasing the inventory of uncompleted properties, and allowing more room for industry self-adjustment in the real estate market are set to be included.
Promoting the robustness of China’s pension system in a financially viable manner could augment the purchasing capabilities of individuals and households, she stated. Moreover, introducing reforms that would level the competition between private and state-run businesses could optimise capital distribution.
She further noted that, “Propelling investments in people – through education, ongoing training and skills enhancement – and superior healthcare could translate into heightened work productivity and elevated earnings.”
In regards to the world economy, she pointed out that the robust underpinnings of most economies, both advanced and emerging, have been instrumental in overcoming recent economic shocks. Yet, she indicated that fiscal institutions across most global territories would likely encounter challenges in 2024. She advised that they need to consider consolidation to decrease debt and reconstruct safety nets, all the while financing their economies’ digital and green development. The statement comes from the Financial Times Limited 2024, under copyright.
In a separate note, China has affirmed the reinstatement of Irish beef exports and relaxation of travel restrictions.