China needs to keep recalibrating its zero-Covid strategy and bolster confidence in the property market to spur economic growth next year, the International Monetary Fund (IMF) said.
The government will need to boost the pace of vaccinations and maintain them at a high level, the organisation said on Wednesday (Nov 23) after staff met virtually with Chinese officials as part of their annual Article IV discussions. To support the property market, China will need to do more to help developers complete unfinished projects, it added.
While China weathered the initial impact of the pandemic well, growth has since slowed and remains under pressure because of Covid, the property sector and weakening global demand, the IMF said. It forecast growth of 3.2 per cent this year, largely in line with economists’ projections, and 4.4 per cent in 2023 and 2024.
Like many other economies, China faces downside risks to its growth outlook, Bloomberg cited IMF deputy managing director Gita Gopinath saying.
Property sector “corrections have to happen, but the idea is to get it done in an orderly manner”, she said. Property weakness is a potential risk for the financial sector, though that was not the IMF’s baseline forecast, she added.
The IMF mission team recommended structural reforms in the real estate sector, including improving the model for how pre-sales work, and increasing the availability of alternative savings options. Authorities should also better protect new homebuyers from risks that the houses they have already paid for will be left unfinished, it said.
China should keep a neutral fiscal policy stance geared towards supporting households in 2023, the IMF said, which will help the economy rebalance. Monetary policy should remain accommodative and rely more on interest-rate-based measures, it said.
The IMF’s growth projections were based on the assumption that the current zero-tolerance approach towards Covid will be gradually and safely lifted in the second half of 2023.