IMF Executive Board Concludes 2023 Article IV Consultation with the People’s Republic of China
IMF News, February 2, 2024
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- Published: February 2, 2024
Overview and near-term outlook
- The Executive Board concluded the Article IV consultation on January 10, 2024.
- China’s real GDP in 2023 is estimated to have grown broadly in line with the authorities’ growth target of around 5 percent.
- Growth is projected to slow to 4.6 percent in 2024 amid ongoing weakness in the property sector and subdued external demand.
- Over the medium term, growth is projected at about 3½ percent in 2028 amid headwinds from weak productivity and population aging.
- Inflation: expected to increase gradually to 1.3 percent in 2024 as the output gap narrows and commodity price base effects recede.
- The projections presented in the Press Release were based on information available as of January 5, 2024.
Key risks and scenarios
- Downside risks:
- Deeper-than-expected contraction in the property sector could weigh on private demand, worsen confidence, amplify local government fiscal strains, and result in disinflationary pressures and adverse macro‑financial feedback loops.
- Greater-than-expected weakening of external demand, tightening of global conditions, and increased geopolitical tensions.
- Upside scenario:
- Decisive policy action, including faster restructuring in the property sector, could boost confidence and lead to a better‑than‑expected rebound in private investment.
- Uncertainty around the outlook is characterized as high given large existing imbalances and associated vulnerabilities.
Executive Board assessment and policy recommendations
- General view:
- Directors welcomed the strong post-pandemic recovery and agreed that continued macroeconomic support and pro‑market structural reforms are needed to mitigate downside risks and boost prospects for high quality, green, and balanced growth.
- Property sector:
- Need for a comprehensive, well sequenced strategy to facilitate a smooth transition of the property sector to a new equilibrium.
- Recommended actions: accelerate exit of nonviable property developers; allocate additional funding for housing completion; assist viable developers to repair balance sheets and adapt to a smaller property market; allow for greater market‑based price adjustment.
- Local government fiscal risks:
- Emphasized need to close local government fiscal gaps and contain debt risks.
- Welcomed authorities’ policy package and recommended progressive tax reforms, public financial management reforms, improved risk sharing between local and central government, greater use of insolvency tools, and enhancements in the financial safety net.
- Financial sector stability:
- Welcomed authorities’ focus on risk prevention and control.
- Recommended strengthening and strictly applying prudential policies, removing forbearance measures to incentivize recognition of nonperforming assets, addressing weak banks, strengthening the legal framework for bank resolution, enhancing the financial safety net and crisis preparedness capacity, and continuing to strengthen the AML/CFT framework.
- Macroeconomic policy mix:
- Agreed macroeconomic policies should support activity in the near term.
- Recommended a budget neutral reorientation of expenditures toward households to support consumption, additional monetary easing via interest rates, and reforms to the monetary policy framework to enhance transmission.
- Recommended greater exchange rate flexibility to help absorb external shocks and improve monetary policy transmission.
- Structural reforms and growth composition:
- Recommended lowering barriers to firm entry and exit, accelerating SOE reforms, and relying more on market‑based allocation of resources to boost productivity and potential growth.
- Emphasized expanding the social safety net to reduce precautionary savings and support balanced growth.
- Recommended strengthening labor market and education policies to boost productivity growth.
- Welcomed authorities’ strong commitment to achieving carbon neutrality and continued implementation of climate policies.
- External and multilateral stance:
- Directors highlighted China’s role in advancing multilateral economic cooperation, supporting sovereign debt restructuring in low income and vulnerable countries, and addressing the global climate crisis.
- Generally agreed scaling back use of industrial policies and trade restrictions would help avoid cross border spillovers and lessen fragmentation pressures.
- Data transparency:
- Emphasized that addressing remaining data gaps would help enhance data transparency and facilitate policy making.
Selected quantitative indicators (highlights from table; annual percentage change unless otherwise indicated)
- Real GDP (base=2015)
- 2018: 6.75
- 2019: 6.0
- 2020: 2.2
- 2021: 8.4
- 2022: 3.0
- 2023 Est.: 5.4
- 2024 Projections: 4.6
- 2025: 4.0
- 2026: 3.8
- 2027: 3.6
- 2028: 3.4
- Consumption (annual change)
- 2018: 7.91
- 2019: 6.3
- 2020: -0.3
- 2021: 9.0
- 2022: 2.0
- 2023: 5.5
- 2024: 4.3
- Total capital formation (percent of GDP)
- 2018: 43.96
- 2019: 43.1
- 2020: 42.9
- 2021: 43.3
- 2022: 43.5
- 2023: 42.3
- 2024: 42.1
- 2025: 41.9
- 2026: 41.7
- 2027: 41.6
- Gross national saving (percent of GDP) 1/
- 2018: 44.14
- 2019: 43.8
- 2020: 44.5
- 2021: 45.3
- 2022: 45.7
- 2023: 43.7
- 2024: 43.4
- Output gap estimate
- 2018: -0.50
- 2019: -1.0
- 2020: -3.6
- 2021: -1.5
- 2022: -2.8
- 2023: -1.4
- 2024: -0.2
- 2025: -0.1
- Consumer prices (average)
- 2018: 1.93
- 2019: 2.9
- 2020: 2.5
- 2021: 0.9
- 2022: 1.9
- 2023: 1.3
- Total social financing (annual change)
- 2018: 10.26
- 2019: 10.7
- 2020: 13.3
- 2021: 10.3
- 2022: 9.6
- 2023: 9.3
- 2024: 8.9
- 2025: 7.3
- 2026: 6.9
- 2027: 6.7
- In percent of GDP (selected)
- Total social financing as percent of GDP series: 247.92 (2018), 254 (2019), 278 (2020), 274 (2021), 286 (2022), 300 (2023), 307 (2024), 312 (2025), 315 (2026), 319 (2027), 322 (2028)
- Household debt (percent of GDP): 52.30 (2018), 55.8 (2019), 61.6 (2020), 62.1 (2021), 62.2 (2022), 63.9 (2023), 62.8 (2024), 62.0 (2025), 61.9 (2026)
- Non-financial corporate domestic debt (percent of GDP): 108.94 (2018), 106 (2019), 112 (2020), 111 (2021), 115 (2022), 119 (2023), 118 (2024), 117 (2025)
- General budgetary government (Percent of GDP)
- Revenue (selected): 28.99 (2018), 28.1 (2019), 25.7 (2020), 26.6 (2021), 25.9 (2022), 26.5 (2023), 26.7 (2024)
- Expenditure (selected): 33.28 (2018), 34.2 (2019), 35.4 (2020), 32.7 (2021), 33.4 (2022), 34.0 (2023), 34.1 (2024)
- Debt (selected): 36.50 (2018), 38.5 (2019), 45.4 (2020), 46.9 (2021), 50.6 (2022), 55.3 (2023), 58.7 (2024), 65.7 (2025), 69.4 (2026), 73.4 (2027)
- Gross official reserves (billions of U.S. dollars)
- 2018: 3167.99
- 2019: 3,223
- 2020: 3,357
- 2021: 3,427
- 2022: 3,307
- 2023: 3,299
- 2024: 3,450
- 2025: 3,572
- 2026: 3,642
- 2027: 3,714
- 2028: 3,787
- Nominal GDP (billions of RMB) 5/
- 2018: 91577.43
- 2019: 99,071
- 2020: 102,563
- 2021: 114,528
- 2022: 120,502
- 2023: 125,544
- 2024: 133,244
- 2025: 141,013
- 2026: 149,076
- 2027: 157,533
- 2028: 166,113
- Augmented debt (percent of GDP) 6/
- 2018: 80.85
- 2019: 86.3
- 2020: 98.8
- 2021: 100.8
- 2022: 107.7
- 2023: 116.2
- 2024: 122.0
- 2025: 127.5
- 2026: 132.8
- 2027: 137.7
- 2028: 142.6
Institutional and procedural notes
- Directors look forward to continued implementation of the authorities’ climate policies.
- It is expected that the next Article IV consultation with the People’s Republic of China will be held on the standard 12‑month cycle.
- Footnotes in the table provide methodological clarifications, including adjustments for consolidated general budgetary government balances, the augmented balance perimeter, and the timing of GDP revisions.
Source: Press Release No. 24/33, IMF Executive Board Concludes 2023 Article IV Consultation with the People’s Republic of China, February 2, 2024.
