Opening Remarks for the Press Briefing of the 2022 China Article IV Staff Report
IMF News, February 3, 2023
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- Authors: Thomas Helbling
- Published: February 3, 2023
Growth projections and timing of consultations
- The discussions for the 2022 Article IV Consultation with China took place in the first half of November last year.
- The projections in the Article IV Staff Report were finalized in mid–December for an Executive Board discussion that took place in mid-January.
- China’s 2022 Q4 GDP outcome was released after the Executive Board meeting; forecasts were revised for the January 2023 WEO Update (not included in the Staff Report or Staff Supplement).
- Key numeric forecast:
- We now project growth to increase from 3 percent in 2022 to 5.2 percent in 2023 driven by a rebound in private consumption amid the earlier-than-anticipated reopening in China.
- The growth forecast is subject to a high degree of uncertainty, including due to the future evolution of the virus.
Risks and uncertainty
- Downside risks:
- Potential economic disruptions from the current and future waves of covid infections.
- A sharper-than-expected slowdown in the property sector.
- The reopening could lead to stronger-than-expected inflationary pressures.
- Upside risks:
- An even stronger recovery in private consumption and investment.
Near-term macro policy guidance
- Given the still-negative output gap in 2023 and significant downside risks, policymakers should avoid a premature tightening of macroeconomic policies.
- Recommended stance:
- A neutral fiscal stance with the composition of spending shifted toward households would support the recovery.
- Additional monetary policy accommodation would help secure the recovery as slack in the economy remains significant and inflation pressures are muted.
- Note on policy timing:
- Support provided in 2022 will expire, reinforcing the need to maintain appropriate accommodation in 2023.
Real estate sector recommendations
- Authorities’ recent policy measures are welcome but additional action is needed to end the real estate crisis.
- Specific recommendations:
- Increase further funding for completion of troubled projects.
- Promote market-based restructuring.
- Expected benefits:
- Help restore homebuyer confidence.
- Contain financial stability risks.
Structural reforms to lift potential growth
- China’s potential growth is experiencing headwinds from demographic trends and slowing productivity growth.
- Key structural policy priorities:
- Reaccelerate pro-growth reforms.
- Further open domestic markets.
- Ensure competitive neutrality between private firms and state-owned enterprises.
- Objective:
- Shore up low productivity growth at a time of shrinking labor supply.
China’s global role
- Together with other countries, China can play a leading role in:
- Addressing geoeconomic tensions.
- Alleviating debt pressures in economies facing debt distress.
- Strengthening global trade openness and transparency.
- Confronting climate change.
Opening Remarks for the Press Briefing of the 2022 China Article IV Staff Report — By Thomas Helbling, Deputy Director, Asia and Pacific Department, February 3, 2023