## Press Briefing on 2023 China Article IV Staff Report _IMF News, February 2, 2024_ ## Source details **Canonical URL:** [Press Briefing on 2023 China Article IV Staff Report](https://www.imf.org/en/news/articles/2024/02/05/tr020224-transcript-of-press-briefing-on-2023-china-article-iv-staff-report) ## Other formats - [Markdown version](/en/news/articles/2024/02/05/tr020224-transcript-of-press-briefing-on-2023-china-article-iv-staff-report/index.md) - [Structured JSON version](/en/news/articles/2024/02/05/tr020224-transcript-of-press-briefing-on-2023-china-article-iv-staff-report/index.json) - [Bundle manifest](/en/news/articles/2024/02/05/tr020224-transcript-of-press-briefing-on-2023-china-article-iv-staff-report/bundle-manifest.json) ## Bibliographic details - Published: February 2, 2024 --- ### Near-term outlook and key macro forecasts - 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. ### Main risks and scenarios - Property-sector downside risk: - A deeper and more prolonged property-sector correction could weigh on domestic demand and confidence. - Potential for adverse macro-financial feedback loops, especially if local government finances come under further stress. - External risks: - Weaker than expected external demand and geoeconomic fragmentation pose additional downside risks to the baseline. - Recent negative developments in exports and FDI reflect a combination of cyclical factors and structural elements, including fragmentation pressures. - Financial sector implications: - Developer and project distress from unfinished housing projects pose credit risks. - 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. - A Financial Sector Assessment Program mission is ongoing to assess banking-sector implications in more detail. ### Property sector diagnosis and outlook - 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: - Demand-side: loosening of mortgage restrictions. - Supply/completion: some financing provided for completion of unfinished housing. - Plans to ramp up spending on social housing and urban redevelopment. ### Policy recommendations (report’s three key recommendations) - 1) Property developer and housing completion actions: - Expedite restructuring of nonviable property developers. - Support housing completion (including central government increased financing for completion). - Allow greater price adjustment to facilitate transition. - 2) Local government debt strategy: - Implement a comprehensive central government–led strategy to reduce the stock of local government debt. - Restructure unsustainable local government financing vehicles (LGFVs) through insolvency mechanisms, including debt write downs and public asset sales. - 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. - 3) Macroeconomic policy support: - Provide adequate macroeconomic policy support to smooth the impact of the property-sector adjustment. - Recommend continued monetary policy accommodation via interest rates. - Recommend a budget-neutral fiscal package that shifts the composition of spending towards households to better support growth amid the adjustment. ### Monetary and fiscal guidance - Monetary policy: - Recommend further monetary easing, particularly via the policy rate instrument. - Note recent easing steps, including a reduction in the reserve requirement ratio. - Recommend monetary policy reforms: phase out deposit rate guidelines, credit targets, and structural credit policies. - Fiscal policy: - Recommend a budget-neutral fiscal package that reorients spending toward households. - Public investment expected to provide some support in 2024 as part of announced fiscal stimulus. ### Structural and medium-term challenges - Demographics and productivity: - Aging population and slowing productivity growth are highlighted as medium-term headwinds. - Fundamental demand for housing expected to be lower going forward because of demographic trends. - Structural reforms: - Report outlines broad-based structural reforms to boost growth potential and support transition to higher-quality growth. ### Additional data points and issues raised in discussion - 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: - Authorities prioritize resolving property-sector issues (cited Central Financial Work Conference). - Authorities see domestic property adjustment as a key risk while also concerned about external fragmentation and its effects on exports and FDI. *Transcript of IMF press briefing on the 2023 China Article IV Staff Report (February 2, 2024).* --- ## References - [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) _Source: https://www.imf.org/en/news/articles/2024/02/05/tr020224-transcript-of-press-briefing-on-2023-china-article-iv-staff-report_