{
  "title": "China’s Shift to Consumption-Led Growth Can Aid Green Goals",
  "publication": "IMF News, January 27, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/01/27/cf-china-shift-to-consumption-led-growth-can-aid-green-goals",
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  "summary": "China rebounded strongly from the pandemic, but growth is losing momentum while remaining overly dependent on support from investment and exports. This imperils the nation’s long-sought transition to sustained high-quality growth that’s balanced, inclusive and green.",
  "authors": [
    "Chang Yong Rhee"
  ],
  "publishDate": "2022-01-27",
  "sections": [
    {
      "heading": "Overview",
      "content": "- China rebounded strongly from the pandemic, but growth is losing momentum while remaining overly dependent on support from investment and exports.\n- The IMF’s annual Article IV review’s key message: rebalancing toward a more consumption-based model will boost growth prospects in the short term and deliver high-quality expansion in the long run.\n- Rebalancing toward consumption will also help bring the country closer to achieving its climate goal of carbon neutrality before 2060."
    },
    {
      "heading": "Economic challenges",
      "content": "- Near-term headwinds:\n  - Slowing real estate investment.\n  - Rapid withdrawal of fiscal support.\n  - New outbreaks of more transmissible virus variants prompting more lockdowns, weighing on the recovery of private consumption.\n- Structural constraints:\n  - Stagnant domestic productivity growth, which has leveled off in the past 10 years just as China’s workforce stopped expanding.\n  - Waning benefits from traditional infrastructure spending.\n  - Technological decoupling reducing the flow of international trade in high-tech goods and services.\n  - A slowdown in trade and cross-border investment that is likely to be costly economically and can affect global growth.\n- Climate ambition adds another challenge to manage while rebalancing growth."
    },
    {
      "heading": "Policy recommendations",
      "content": "- Fiscal policy (near term):\n  - Adopt a more neutral fiscal stance.\n  - Steer spending away from infrastructure and toward income support to vulnerable people to boost lagging private consumption.\n- Social protection:\n  - Improve the social protection system to offer people more security, reduce precautionary savings, and better promote consumption in the future.\n- Market and structural reforms:\n  - Re-energize economic reforms stalled by the pandemic to boost productivity and reverse faltering market dynamism.\n  - Empower private enterprises by letting private firms compete more with state-owned companies and continuing to open domestic markets."
    },
    {
      "heading": "Climate and growth interactions",
      "content": "- Risks of continued investment-driven growth:\n  - Would accelerate the decline in investment returns.\n  - Due to the high carbon-intensity of investment, including from construction, would make it much harder for China to meet its climate goals.\n- Benefits of rebalancing toward consumption:\n  - Shifts activity to relatively untapped services industries and away from carbon-intensive industrial sectors.\n  - Decreases the energy intensity of China’s GDP, lessens the country’s energy demand and eases the pressure for energy security.\n  - Rebalancing alone can help cut carbon emissions by about 15 percent over the next three decades, as IMF staff simulations show.\n- Complementary measures:\n  - Climate policies combined with greener investment—which is more productive and growth-friendly than traditional spending—will steer demand away from emissions-intensive uses and support greener development."
    },
    {
      "heading": "Key findings and implications",
      "content": "- Rebalancing supports both domestic high-quality growth and global climate aims.\n- Policies centered around economic rebalancing would ensure sustained high-quality growth is achievable and more durable, benefiting China and the world.\n\nIMF Asia and Pacific Department; January 27, 2022. Authors: Chang Yong Rhee, Helge Berger, Wenjie Chen.\n\n---\n\n\n References\n\n- https://www.imf.org/en/News/country-focus\n- IMF COVID-19 Hub\n- Policy Tracker\n- Financial Assistance\n- Questions & Answers\n- PRESS CENTER\n- Read the Article IV review\n- Read the press release\n- China and the IMF\n- recent IMF staff research shows\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/01/27/cf-china-shift-to-consumption-led-growth-can-aid-green-goals"
    }
  ],
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    "Authors: Chang Yong Rhee",
    "Published: January 27, 2022",
    "China rebounded strongly from the pandemic, but growth is losing momentum while remaining overly dependent on support from investment and exports.",
    "The IMF’s annual Article IV review’s key message: rebalancing toward a more consumption-based model will boost growth prospects in the short term and deliver high-quality expansion in the long run.",
    "Rebalancing toward consumption will also help bring the country closer to achieving its climate goal of carbon neutrality before 2060.",
    "Near-term headwinds:",
    "Structural constraints:",
    "Climate ambition adds another challenge to manage while rebalancing growth.",
    "Fiscal policy (near term):",
    "Social protection:",
    "Market and structural reforms:",
    "Risks of continued investment-driven growth:",
    "Benefits of rebalancing toward consumption:",
    "Complementary measures:",
    "Rebalancing supports both domestic high-quality growth and global climate aims.",
    "Policies centered around economic rebalancing would ensure sustained high-quality growth is achievable and more durable, benefiting China and the world.",
    "[https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)",
    "[IMF COVID-19 Hub](https://www.imf.org/en/Topics/imf-and-covid19)",
    "[Policy Tracker](https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19)",
    "[Financial Assistance](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)",
    "[Questions & Answers](https://www.imf.org/en/About/FAQ/imf-response-to-covid-19)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Read the Article IV review](https://www.imf.org/en/Publications/CR/Issues/2022/01/26/Peoples-Republic-of-China-2021-Article-IV-Consultation-Press-Release-Staff-Report-and-512248)",
    "[Read the press release](https://www.imf.org/en/News/Articles/2022/01/26/pr2217-imf-executive-board-concludes-2021-article-iv-consultation-with-the-peoples-republic-of-china)",
    "[China and the IMF](https://www.imf.org/en/Countries/CHN)",
    "[recent IMF staff research shows](https://www.imf.org/en/Publications/WP/Issues/2021/03/12/Sizing-Up-the-Effects-of-Technological-Decoupling-50125)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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