China GDP: IMF revises up 2023, 2024 economic growth outlooks, but calls for hastened action to fix property sector

International Monetary Fund (IMF) revises up China’s gross domestic product growth rate forecasts to 5.4 per cent for 2023 and 4.6 per cent in 2024
But the Washington-based organisation warned that continued weakness in China’s property sector and subdued external demand would continue to slow growth

China GDP

Kinling Loin Beijing

Published: 8:00pm, 7 Nov 2023

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Citing “stronger than expected” consumption in the third quarter, the International Monetary Fund (IMF) raised its forecasts for China’s gross domestic product growth rate to 5.4 per cent for 2023 and 4.6 per cent in 2024, but still advised a “hastened” restructuring in the property sector on Tuesday in Beijing.

The figures were revised up from 5 per cent and 4.2 per cent, respectively, which were published in the IMF’s “World Economic Outlook” last month.

“Third quarter GDP growth came out stronger than we expected, and it was driven by stronger consumption that we had expected,” IMF first deputy managing director Gita Gopinath said in Beijing on Tuesday.

China’s economy grew by 1.3 per cent in the third quarter from the previous three months, and by 4.9 per cent year on year, although the property market remained a drag as real estate investment fell by 9.1 per cent in the first three quarters.

The latest projections were made after the Washington-based organisation completed its China stop under its Article IV Mission, which sends economists to member countries to monitor economic and financial policies and provide recommendations.

Gopinath added that China’s recently announced fiscal stimulus – including the 1 trillion yuan (US$137 billion) of sovereign bond quota added last week – helped to raise the forecasts.

However, the IMF still expects China’s growth to continue to slow next year and to slow to “about 3.5 per cent” amid “headwinds from weak productivity growth” in the medium term.

“So far for this year, we have quite a strong contribution of consumption to growth, and this proportion we expect to decline a little bit next year,” said Sonali Jain-Chandra, the IMF’s mission chief for China.

“The reason is this year, the consumption was very strong given the low base effect from reopening post pandemic.”

Our advice is to hasten the exit of unviable property developer

Gita Gopinath

Gopinath added that the continued weakness in China’s property sector and subdued external demand would continue to slow China’s economic growth.

The medium projection could rise again if China adopts “pro-market structural reforms”, Gopinath added.

“In this regard, our advice is to hasten the exit of unviable property developers. And we also think there’s a role for the central government to provide funding to complete the housing projects that still need to be completed because that can also raise sentiment,” Gopinath said.

Gopinath said there also needs to be fiscal framework reforms to address local government debt issues and to reduce risks for small and medium-sized banks.

She added that strengthening the social safety net could address the issue of an ageing population, and reduce high-rates of household savings and further boost consumption.

Chinese Vice-Premier He Lifeng told the Global Financial Leaders’ Investment Summit in Hong Kong on Tuesday that China’s economy is expected to meet its annual growth target of “around 5 per cent” this year.

“It will certainly inject fresh and positive energy into the global economic recovery,” said He.

“China’s development itself has global significance.”

Additional reporting by Li Jiaxing