{
  "title": "Press Briefing 2021 China Article IV",
  "publication": "IMF News, January 29, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/01/29/tr012722-press-briefing-2021-china-article-iv",
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  "summary": "The Chinese economy is slowing down; macroeconomic policy should adjust to protect growth.",
  "publishDate": "2022-01-29",
  "sections": [
    {
      "heading": "Principal takeaways (Helge Berger’s three key messages)",
      "content": "- The Chinese economy is slowing down; macroeconomic policy should adjust to protect growth.\n  - Monetary policy has moved toward accommodation, including recent policy rate reductions.\n  - Fiscal policy remains in consolidation mode and is subtracting from growth; IMF recommends a neutral fiscal stance in 2022.\n- Rebalancing away from investment and toward consumption will raise growth quality and help meet climate goals.\n  - Consumption is generally less carbon intensive than investment.\n  - Rebalancing can get China \"15 percent closer to achieving its climate goals\" than not rebalancing.\n  - Fiscal support should prioritize low-income households now and lay groundwork for strengthening social protection long term.\n- China faces a pronounced productivity slowdown.\n  - Aggregate total factor productivity (TFP) growth averaged \"0.7 percent\" per year over the last 10 years.\n  - This contrasts with \"3.5 percent\" TFP growth in the 10 years prior.\n  - Recommendations include reaccelerating SOE reform and implementing \"competitive neutrality\" reforms so private firms can compete on equal footing with state-owned enterprises."
    },
    {
      "heading": "Growth outlook and macro policy recommendations",
      "content": "- IMF view on policy stance:\n  - Monetary: remain accommodative in 2022 given low inflation and slack; welcome recent policy rate and borrowing-cost reductions and LPR adjustments.\n  - Fiscal: shift from consolidation to neutral stance in 2022 to avoid further subtraction from growth.\n- Fiscal composition and targeting:\n  - Short-term: direct support to low-income households to boost consumption.\n  - Medium/long-term: improve social protection (social insurance, medical benefits, unemployment insurance, social assistance, pension reform) to lower household precautionary savings and support consumption-led growth.\n- Risks and monitoring:\n  - Watch for worsening growth momentum; be prepared to provide additional macro support if needed."
    },
    {
      "heading": "Property sector: stresses, contagion risk, and policy guidance",
      "content": "- Current situation:\n  - Significant stress among developers (Evergrande noted as the starting point), with spillovers to other developers and potential contagion to the financial system and broader economy.\n- Short-term policy priorities:\n  - Intensify surveillance of developers and lenders; assess pressure points and interlinkages.\n  - Strengthen central government coordination of policy responses; improve policy communication.\n  - Ensure timely completion of pre-sold housing to restore confidence.\n  - Facilitate swift restructuring of troubled developers with differentiation between viable and non-viable firms; provide liquidity/support to viable developers.\n- Medium-to-long-term priorities:\n  - Strengthen macroprudential and real estate policies to limit demand-driven risks and address pre-sale practices.\n  - Continue strengthening bankruptcy processes for non-financial corporates."
    },
    {
      "heading": "COVID containment policy and economic impact",
      "content": "- Zero COVID measures initially effective in 2020–2021 but, since roughly last summer, outbreaks became more frequent and containment measures more frequent.\n- More frequent containment reduced consumption and contributed to a downgraded 2022 forecast.\n- Policy implications:\n  - Recalibrate and fine-tune containment measures to reduce disruption.\n  - Improve vaccine coverage and public-health resilience to reduce economic impact of outbreaks."
    },
    {
      "heading": "Capital flows, RMB exchange rate, and internationalization",
      "content": "- Impact of rising U.S. rates on China:\n  - IMF judges the impact would be small because China’s capital account is \"still mostly closed\" and structural inflows dominate; flows are relatively slow.\n- Exchange rate view:\n  - Renminbi movements have reflected changing macro positions during the pandemic (weakened during China’s early lockdown; later appreciated).\n  - IMF encourages continued exchange rate flexibility; fundamentals determine international currency use.\n- CBDC (e-CNY):\n  - China is advanced in CBDC pilots, including cross-border experiments.\n  - IMF: determinants of currency international use remain fundamentals (capital account openness, convertibility, trade invoicing); e-CNY alone unlikely to substantially change RMB’s international role without broader reforms."
    },
    {
      "heading": "Structural challenges: productivity, regulation, and technology sector uncertainty",
      "content": "- Productivity:\n  - Aggregate TFP slowdown from \"3.5 percent\" to \"0.7 percent\" average annual growth across decades is a major headwind, especially as the workforce has stopped growing.\n  - Policy priority: deepen market-oriented reforms (SOE reform, competitive neutrality) to boost productivity.\n- Regulatory environment and policy uncertainty:\n  - Recent regulatory tightening in the technology sector increased policy uncertainty for firms.\n  - IMF stance: regulation to ensure fair competition and consumer protection can be appropriate, but must be implemented transparently and predictably to preserve efficient market operations.\n- International economic relationship:\n  - Decoupling in trade and FDI, particularly in technology, could harm productivity and growth in both China and partner economies; IMF encourages resolving issues within multilateral, rules-based frameworks."
    },
    {
      "heading": "Climate strategy and green transition",
      "content": "- China has set ambitious climate goals; implementation is the critical next step.\n- Policy recommendations to minimize tradeoffs with growth:\n  - Accelerate rebalancing toward consumption to achieve a double dividend (higher-quality growth and lower carbon intensity).\n  - Strengthen and price carbon via the emissions trading system (ensure firms pay for CO2 allocations and that prices influence investment decisions).\n  - Reform power-sector incentives and expand market-based policies across sectors.\n  - Expand green finance to mobilize investment for the transition.\n- Timing: greater early action and reforms make the transition more affordable and reduce growth tradeoffs over time."
    },
    {
      "heading": "Other discussion points from the briefing",
      "content": "- Surveillance and communication:\n  - IMF staff emphasized the importance of intensified monitoring (developers, lenders) and better central coordination and communication of policy responses.\n- Hong Kong-related questions:\n  - IMF noted a separate Article IV for Hong Kong is being finalized; related questions about Hong Kong’s developments will be addressed in that report.\n- Administrative details and context:\n  - Press briefing date: January 28, 2022.\n  - Press officer: Ting Yan; Phone: +1 202 623-7100; Email: MEDIA@IMF.org.\n  - Embargo reminder cited in the briefing: embargo until \"3 a.m. Washington, D.C. time which will be 4 p.m. Friday, Beijing time.\"\n\nTranscript of IMF press briefing on the 2021 China Article IV Staff Report (January 28, 2022).\n\n---\n\n\n References\n\n- People's Republic of China and the IMF\n- IMF Policy Advice -- A Factsheet\n- Transcripts\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/01/29/tr012722-press-briefing-2021-china-article-iv"
    }
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    "Published: January 29, 2022",
    "The Chinese economy is slowing down; macroeconomic policy should adjust to protect growth.",
    "Rebalancing away from investment and toward consumption will raise growth quality and help meet climate goals.",
    "China faces a pronounced productivity slowdown.",
    "IMF view on policy stance:",
    "Fiscal composition and targeting:",
    "Risks and monitoring:",
    "Current situation:",
    "Short-term policy priorities:",
    "Medium-to-long-term priorities:",
    "Zero COVID measures initially effective in 2020–2021 but, since roughly last summer, outbreaks became more frequent and containment measures more frequent.",
    "More frequent containment reduced consumption and contributed to a downgraded 2022 forecast.",
    "Policy implications:",
    "Impact of rising U.S. rates on China:",
    "Exchange rate view:",
    "CBDC (e-CNY):",
    "Productivity:",
    "Regulatory environment and policy uncertainty:",
    "International economic relationship:",
    "China has set ambitious climate goals; implementation is the critical next step.",
    "Policy recommendations to minimize tradeoffs with growth:",
    "Timing: greater early action and reforms make the transition more affordable and reduce growth tradeoffs over time.",
    "Surveillance and communication:",
    "Hong Kong-related questions:",
    "Administrative details and context:",
    "[People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Transcripts](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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