The International Monetary Fund has upgraded its forecast for China’s economy, predicting a 5% annual growth rate for this year, which is 0.4 percentage points higher than its earlier estimate. The IMF emphasized the need for consumer-friendly reforms to sustain strong and high-quality growth in the world's second-largest economy.
The report highlighted the importance of building stronger social safety nets and increasing workers' incomes to boost consumer spending. It also recommended that Beijing should reduce subsidies and other policies favoring manufacturing over other sectors like services.
China's economy exceeded expectations by growing at a rate of 5.3% in the first quarter of the year, contributing positively to the global economy. The government's growth target for the year is set at around 5%, with recent measures to support growth in the property sector, such as lower interest rates and relaxed down-payment requirements on home loans.
Despite the positive outlook, the IMF cautioned that risks remain, with a forecasted growth rate of 4.5% for 2025. The report praised China's focus on 'high-quality' growth through investments in clean energy, advanced technology, and improved financial industry regulations.
However, the IMF suggested a more balanced policy approach to help China address economic challenges, including job losses during the pandemic and declining housing prices affecting many Chinese households. Economists also echoed the need for a stronger social safety net and higher incomes to boost consumer spending.
In the long term, the IMF projected a decline in China's annual economic growth to 3.3% by 2029 due to factors like an aging population, slower productivity growth, and challenges in the housing sector. The report also raised concerns about China's industrial policies supporting sectors like automaking and computer chip development, which could impact trading partners and lead to resource wastage.
The ongoing trade tensions between the U.S. and China were highlighted, with U.S. officials accusing China of providing unfair support to its industries and creating excess manufacturing capacity. China, on the other hand, rejected these claims and criticized restrictions imposed by wealthy nations on technology exports to China under the guise of national security concerns.
