{
  "title": "Press Briefing on 2023 China Article IV Staff Report",
  "publication": "IMF News, February 2, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/02/05/tr020224-transcript-of-press-briefing-on-2023-china-article-iv-staff-report",
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  "summary": "Press Briefing on 2023 China Article IV Staff Report",
  "publishDate": "2024-02-02",
  "sections": [
    {
      "heading": "Near-term outlook and key macro forecasts",
      "content": "- Real GDP growth: projected to slow to 4.6 percent in 2024.\n- 2023 growth: Staff Report initially forecast 5.4 percent (prepared in late December); subsequent GDP outturn for 2023 was 5.2 percent (reflected in the World Economic Outlook Update).\n- Real estate: real estate investment expected to continue to contract in 2024 amid excess housing inventories, unresolved developer stress, and weak homebuyer sentiment.\n- Inflation: \"we project average inflation to be 1.1 percent, rising from 0.3 percent this year, over last year.\"\n- Urbanization: China's urbanization rate is around 65 percent; comparator average cited is closer to 80 percent."
    },
    {
      "heading": "Main risks and scenarios",
      "content": "- Property-sector downside risk:\n  - A deeper and more prolonged property-sector correction could weigh on domestic demand and confidence.\n  - Potential for adverse macro-financial feedback loops, especially if local government finances come under further stress.\n- External risks:\n  - Weaker than expected external demand and geoeconomic fragmentation pose additional downside risks to the baseline.\n  - Recent negative developments in exports and FDI reflect a combination of cyclical factors and structural elements, including fragmentation pressures.\n- Financial sector implications:\n  - Developer and project distress from unfinished housing projects pose credit risks.\n  - Many banks start from a strong capital position; tight macroprudential measures and substantial household equity in housing are cited as factors containing immediate financial sector risks.\n  - A Financial Sector Assessment Program mission is ongoing to assess banking-sector implications in more detail."
    },
    {
      "heading": "Property sector diagnosis and outlook",
      "content": "- Nature of adjustment: described as a multi-year transition toward a smaller and more sustainable property sector; adjustment has started but is ongoing.\n- Expectations in baseline: continued contraction of real estate investment in 2024.\n- Cost estimate for completing unfinished presold housing: put at about 5 percent of GDP.\n- Policy measures already taken by authorities:\n  - Demand-side: loosening of mortgage restrictions.\n  - Supply/completion: some financing provided for completion of unfinished housing.\n  - Plans to ramp up spending on social housing and urban redevelopment."
    },
    {
      "heading": "Policy recommendations (report’s three key recommendations)",
      "content": "- 1) Property developer and housing completion actions:\n  - Expedite restructuring of nonviable property developers.\n  - Support housing completion (including central government increased financing for completion).\n  - Allow greater price adjustment to facilitate transition.\n- 2) Local government debt strategy:\n  - Implement a comprehensive central government–led strategy to reduce the stock of local government debt.\n  - Restructure unsustainable local government financing vehicles (LGFVs) through insolvency mechanisms, including debt write downs and public asset sales.\n  - Undertake triage of LGFVs into sustainable and unsustainable groups; for unsustainable LGFVs, pursue corporate insolvency processes and burden sharing across central government, local governments, and investors.\n- 3) Macroeconomic policy support:\n  - Provide adequate macroeconomic policy support to smooth the impact of the property-sector adjustment.\n  - Recommend continued monetary policy accommodation via interest rates.\n  - Recommend a budget-neutral fiscal package that shifts the composition of spending towards households to better support growth amid the adjustment."
    },
    {
      "heading": "Monetary and fiscal guidance",
      "content": "- Monetary policy:\n  - Recommend further monetary easing, particularly via the policy rate instrument.\n  - Note recent easing steps, including a reduction in the reserve requirement ratio.\n  - Recommend monetary policy reforms: phase out deposit rate guidelines, credit targets, and structural credit policies.\n- Fiscal policy:\n  - Recommend a budget-neutral fiscal package that reorients spending toward households.\n  - Public investment expected to provide some support in 2024 as part of announced fiscal stimulus."
    },
    {
      "heading": "Structural and medium-term challenges",
      "content": "- Demographics and productivity:\n  - Aging population and slowing productivity growth are highlighted as medium-term headwinds.\n  - Fundamental demand for housing expected to be lower going forward because of demographic trends.\n- Structural reforms:\n  - Report outlines broad-based structural reforms to boost growth potential and support transition to higher-quality growth."
    },
    {
      "heading": "Additional data points and issues raised in discussion",
      "content": "- LGFV debt estimates referenced in Q&A: a figure of 65.9 trillion yuan as of this year versus an earlier estimate of 74.4 trillion yuan cited in a question; details and drivers of the change were not finalized during the briefing and follow-up bilateral clarification was offered.\n- Authorities’ stance:\n  - Authorities prioritize resolving property-sector issues (cited Central Financial Work Conference).\n  - Authorities see domestic property adjustment as a key risk while also concerned about external fragmentation and its effects on exports and FDI.\n\nTranscript of IMF press briefing on the 2023 China Article IV Staff Report (February 2, 2024).\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/2024/02/05/tr020224-transcript-of-press-briefing-on-2023-china-article-iv-staff-report"
    }
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    "Published: February 2, 2024",
    "Real GDP growth: projected to slow to 4.6 percent in 2024.",
    "2023 growth: Staff Report initially forecast 5.4 percent (prepared in late December); subsequent GDP outturn for 2023 was 5.2 percent (reflected in the World Economic Outlook Update).",
    "Real estate: real estate investment expected to continue to contract in 2024 amid excess housing inventories, unresolved developer stress, and weak homebuyer sentiment.",
    "Inflation: \"we project average inflation to be 1.1 percent, rising from 0.3 percent this year, over last year.\"",
    "Urbanization: China's urbanization rate is around 65 percent; comparator average cited is closer to 80 percent.",
    "Property-sector downside risk:",
    "External risks:",
    "Financial sector implications:",
    "Nature of adjustment: described as a multi-year transition toward a smaller and more sustainable property sector; adjustment has started but is ongoing.",
    "Expectations in baseline: continued contraction of real estate investment in 2024.",
    "Cost estimate for completing unfinished presold housing: put at about 5 percent of GDP.",
    "Policy measures already taken by authorities:",
    "1) Property developer and housing completion actions:",
    "2) Local government debt strategy:",
    "3) Macroeconomic policy support:",
    "Monetary policy:",
    "Fiscal policy:",
    "Demographics and productivity:",
    "Structural reforms:",
    "LGFV debt estimates referenced in Q&A: a figure of 65.9 trillion yuan as of this year versus an earlier estimate of 74.4 trillion yuan cited in a question; details and drivers of the change were not finalized during the briefing and follow-up bilateral clarification was offered.",
    "Authorities’ stance:",
    "[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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