IMF Staff Completes 2020 Article IV Mission to the People’s Republic of China

IMF News, November 4, 2020

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Press Release No. 20/330; dated November 4, 2020.
IMF team led by Mr. Helge Berger, Mission Chief for China and Assistant Director of the Asia and Pacific Department.
Virtual Article IV Consultation discussions conducted from October 26 to November 4, 2020.
Discussions held with senior officials from the government, the People’s Bank of China, private sector representatives, and academics.
IMF First Deputy Managing Director Mr. Geoffrey Okamoto joined policy discussions and met with:
- People’s Bank of China Governor Yi Gang
- China Securities Regulatory Commission (CSRC) Chairman Yi Huiman
- China Banking and Insurance Regulatory Commission (CBIRC) Vice Chairman Zhou Liang
IMF Communications Department media contact: PRESS OFFICER: Ting Yan; Phone: +1 202 623-7100; Email: MEDIA@IMF.org; @IMFSpokesperson

GDP growth projected at 1.9 percent in 2020.
GDP growth projected at 8.2 percent in 2021.
Core inflation expected to remain subdued.
CPI inflation in 2021 expected to be below the pre-crisis target of about 3 percent.
Recovery characterized as fast but unbalanced, relying heavily on public support while private consumption is lagging.
Downside risks to the outlook identified from rising financial vulnerabilities and an increasingly challenging external environment.

Fiscal policy:
- Recommendation: stay slightly expansionary in 2021.
- Shift composition from spending on infrastructure towards strengthening social safety nets and promoting green investment.
- With public debt already high and rising, fiscal policy effectiveness should be underpinned by:
- an improved macro-fiscal framework,
- better intergovernmental coordination,
- leveraging digital technologies to deliver support to vulnerable groups.
Monetary policy:
- Recommendation: remain accommodative given low inflation.
- Accommodative monetary stance will support the fiscal effort.
- Further modernization of the monetary policy framework recommended to strengthen the effectiveness of conventional interest rate policies and improve credit intermediation.
- Continued exchange rate flexibility recommended to facilitate adjustment to changing external circumstances.

Authorities are monitoring financial vulnerabilities closely.
As recovery takes hold, recommendation to replace exceptional financial support measures with proactive efforts to:
- address problem loans,
- strengthen regulatory and supervisory frameworks.
Recommendation: establish a comprehensive bank restructuring framework to lower systemic risks and continue de-risking.

Simultaneous implementation of additional key reforms recommended:
- further opening up of domestic markets,
- reforming state-owned enterprises (SOEs),
- ensuring competitive neutrality with private firms,
- promoting green investment,
- strengthening social safety nets.
Expected outcomes: support a job-rich and balanced recovery; boost potential growth; reduce external imbalances; build a more resilient, greener, and more inclusive economy.

China can help the international community address major global challenges by:
- supporting international efforts to expand access to a vaccine,
- providing debt relief to low-income countries,
- providing sustainable financing for global infrastructure investment,
- tackling climate change.
Recommendation: China and its trading partners should work together to build a more open, stable, transparent, rules-based international trade and investment system.

IMF Staff Completes 2020 Article IV Mission to the People’s Republic of China