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

November 4, 2020

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
  • The Chinese economy continues its fast recovery from the pandemic, helped by a strong containment effort and swift policy actions early on to mitigate the crisis and support the recovery. GDP growth is projected at 1.9 percent in 2020 and 8.2 percent in 2021.
  • Moderately expansionary macroeconomic policies in 2021 will help a balanced recovery, supported by a shift from public to private demand. Further structural reforms can help contain financial risks, promote greener and more inclusive growth, and reduce external imbalances.
  • China can help the international community to overcome several of the major challenges facing the global economy, by supporting international efforts to expand access to a vaccine, providing debt relief to low-income countries and sustainable financing for global infrastructure investment, and tackling climate change.

Washington, DC: An International Monetary Fund (IMF) team, led by Mr. Helge Berger, Mission Chief for China and Assistant Director of the Asia and Pacific Department, conducted discussions virtually on the 2020 Article IV Consultation from October 26 to November 4, 2020. The mission held highly constructive and candid discussions with senior officials from the government, the People’s Bank of China, private sector representatives, and academics to exchange views on economic prospects, reform progress and challenges, and policy responses.

The IMF's First Deputy Managing Director, Mr. Geoffrey Okamoto, joined the policy discussions and met with People’s Bank of China Governor Yi Gang, China Securities Regulatory Commission (CSRC) Chairman Yi Huiman, and China Banking and Insurance Regulatory Commission (CBIRC) Vice Chairman Zhou Liang.

At the end of the virtual visit, Mr. Okamoto issued the following statement:

“The COVID-19 pandemic has inflicted significant human and economic costs on China, but a major containment effort has helped contain the spread of the virus, and macroeconomic and financial policies have mitigated the crisis’ impact and quickly returned the economy to growth. Despite the crisis, important reforms continued, including steps taken to further open the financial sector, advance Hukou reform, and improve intellectual property protection. Our discussions focused on the authorities’ policy mix to secure balanced growth against the headwinds from the global pandemic.

“The Chinese economy continues its fast recovery, with GDP growth projected at 1.9 percent in 2020 and 8.2 percent in 2021. Core inflation is expected to remain subdued, leaving CPI inflation in 2021 below the pre-crisis target of about 3 percent.

“While the recovery is advancing, growth remains unbalanced as it relies heavily on public support while private consumption is lagging. The outlook faces downside risks, stemming from rising financial vulnerabilities and the increasingly challenging external environment.

“To secure a balanced recovery, macroeconomic policies need to remain supportive and their effectiveness enhanced. Fiscal policy should stay slightly expansionary, shifting from spending on infrastructure towards strengthening social safety nets and promoting green investment. With public debt already high and rising, fiscal policy will be more effective when underpinned by an improved macro-fiscal framework and intergovernmental coordination, while leveraging digital technologies to deliver support to vulnerable groups.

“Given low inflation, monetary policy should remain accommodative, which will also support the fiscal effort. Further modernization of the monetary policy framework to strengthen the effectiveness of conventional interest rate policies would help improve credit intermediation. Continued exchange rate flexibility will be essential to facilitate adjustment to changing external circumstances.

“To safeguard stability, the authorities are monitoring financial vulnerabilities closely. As the recovery takes hold, exceptional financial support measures to avoid a credit squeeze should be replaced with proactive efforts to address problem loans and strengthen regulatory and supervisory frameworks. A comprehensive bank restructuring framework will lower systemic risks and continue de-risking.

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

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

“We would like to thank the authorities for the excellent discussions and support which made this virtual Article IV visit possible."

IMF Communications Department


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