IMF Managing Direector: China has to define growth strategies for future

Observing that China has benefit of a particular set of policies over the last decades for its exportoriented growth IMF Managing Director Kristalina Georgieva has said that the time has come for Beijing to look at domestic sources for growth opening up more opportunities for the marketChinas economy grew at 53 per cent in the first quarter making a strongerthanexpected start to the year even as the downturn of its property market continued while the domestic demand remained subduedThe GDP grew 53 per cent year on year to 2963 trillion yuan about USD 417 trillion in the first three months of 2024 data from the National Bureau of Statistics showed on TuesdayChina is the fork in the road Why Because China has to define growth strategies for the future China has the benefit of a particular set of policies over the last decades exportoriented growth but the time has come to look at domestic sources for growth opening up more opportunities for the market to lift up these prospects Georgieva saidThe IMF sees three important opportunities for China she saidNumber one to shift the economy more towards domestic consumption It is actually in line with what China is aspiring to the dual circulation economy It would take giving consumers more confidence and offering them more services and more things to buyWe know that the healthcare services in China can expand quite significantly We know that getting the social safety nets to work more effectively would give people an opportunity to save a bit less to spend a bit more she saidSecondly we see the reforms in China that have served the country well continuing to be needed reforms of stateowned enterprises opening up for a more competitive environment In the years ahead that can help China grow more Georgieva saidLast but not least there are some problems right now and how they are solved will have implications for Chinas growth she observedThe most obvious example is the property sector People in China rely on their homeownership as a way of saving When prices thereas savings go down when prices of real estate go down that affects consumer confidence So clearing up the problems in the sector more resolutely would certainly help China she saidWe see China making some important decisions around greening their growth pattern Again the more China does for lifting up domestic consumption the better the IMF Managing Director saidAt a separate news conference Krishna Srinivasan Director of IMF Asia and Pacific Department told reporters that on the macroeconomic aspects Chinas economy is experiencing weak domestic demandThis emanates from two factors the continued weakness in the real estate sector and the legacies of the pandemicSo in that context the IMF has advocated for two thingsOne is policies that would help address the problem in the property sector and other than that trying to boost consumption demand by improving social safety nets in the case of China and again improving the pension system in a fiscally prudent way and investing in people education and healthSo thats as far as once on the domestic demand side if you pursue these policies you will see domestic demand rising and deflation risks coming down he saidChina provides wideranging support to priority sectors This includes preferential access to credit research funds and incentives for certain firms particularly in the areas of strategic manufacturing and science and technologyIn terms of what China can do on the first issue of misallocation of resources we have talked about the fact that it is important to address SOE reform quite urgently scaling back of industrial policies which provide implicit or explicit guarantees for SOEs So in other words try to make it have to ensure competitive neutrality between SOEs and the private sector so that theres no misallocation of resources doesnt happen Srinivasan saidThats one thing And again we also said that SOE reforms some SOEs are clearly unprofitable And the more support you provide you keep them in business for longer than they should be So thats something which weve called for in terms of SOE reforms And so those are the policies which were advocating for China both to address to address the issue of what you talked about as overproduction he addedThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever