IMF upgrades pace of China’s economic growth
China’s economic growth is set to grow by 5.2% in 2023, according to the International Monetary Fund, up 0.8 percentage points on its projection in October 2022.
The IMF said in its World Economic Outlook Update that the country’s recent reopening from Covid restrictions has paved the way for a faster-than-expected recovery.
Pent-up demand also could fuel growth in China, according to the report, titled ‘Inflation Peaking amid Low Growth’.
Pierre-Olivier Gourinchas, IMF chief economist, commented: “The restrictions and Covid-19 outbreaks in China dampened activity last year. With the economy now re-opened, we see growth rebounding to 5.2% this year as activity and mobility recover.
“All the indications are that we are witnessing a rapid reopening of the economy,” he said at a press conference on the launch of the IMF report. He said that the reopening will have an impact on the supply side, meaning there will be fewer supply chain disruptions than in 2022.
“Also we’re going to get an increase in domestic demand as Chinese households are going to be able to resume activities and start spending. We’re going to see that in a number of dimensions, including, for instance, tourism, that’s going to be an engine that will benefit other countries as well,” he said.
Gourinchas said that the IMF estimates that for every percentage point of higher growth in China, there is a knock-on effect to the rest of the world of about 0.3 percentage points, which he described as “quite significant”.
The knock-on effect is stronger for countries that are closer trade partners of China, he added.
The forecast is almost 1 percentage point higher than projected by IMF’s sister agency, the World Bank, which predicted in early January that China’s economy will grow by 4.3% this year, then rise by 5% in 2024.
Fall-off in 2024
However, the IMF, forecasts China’s economic growth will fall to 4.5% in 2024. It said a resurgence of Covid could hold back the recovery, so accelerating the vaccination programme in China would protect the recovery.
In addition, a sharper-than-expected slowdown in the property sector could also stall China’s recovery, Gourinchas said.
The IMF said that, globally, the rise in central bank rates to fight inflation and the conflict in Ukraine continue to hold back economic activity, with global inflation expected to fall from 8.8% in 2022, to 6.6% in 2023, and 4.3% in 2024, still above pre-pandemic levels of about 3.5%.
It said that world economic growth will slow from 3.4% in 2022 to 2.9% in 2023, then rebound to 3.1% in 2024.
Anticipated growth for 2023 is 0.2 percentage point higher than predicted in the October 2022 World Economic Outlook.
That growth will remain weak by historical standards, as the world economy grew by 3.8% on average between 2000 and 2019, the IMF said. Gourinchas said that India and China will account for half of global growth this year.
In the report, the IMF warned that geopolitical factors, , such as the conflict in Ukraine and the related international sanctions, are fragmenting the world economy into blocs and reinforcing earlier geopolitical tensions.
Gourinchas said: “We must buttress multilateral cooperation, especially on fundamental areas of common interest such as international trade, expanding the global financial safety net, public health preparedness and the climate transition.”
Beijing looks to make doing business easier
Beijing’s authorities are to implement a number of measures designed to improve the commercial environment in the capital by removing barriers to business.
The Beijing Municipal Commission Development and Reform Commission has published a document outlining measures including speeding up business reviews and approvals, encouraging innovation in business operations and strengthening protections of intellectual property.
It says the city will improve its e-commerce retail environment; upgrade its regulatory system; encourage financial institutions to provide more credit with preferential interest rates, flexible repayment arrangements; and identify traditional Chinese medicine products for cross-border e-commerce.
The Commission said it will encourage the sale of electric vehicles by introducing more charging points.
Furthermore, it also aims to further protect intellectual property, setting up a public service system for IP protection of new brands.
According to the Commission, consumer spending contributes more than 60% of the economic growth for Beijing.
