## Advancing China’s Sustainable Economic Growth

_IMF News, March 24, 2024_

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## Bibliographic details
- Published: March 24, 2024

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### The global economy
- The year ahead will require careful calibration of monetary and fiscal policies to secure a soft landing — bringing inflation down while maintaining growth firmly in positive territory.
- Central banks must decide when to cut interest rates and by how much, based on data, because the pace of disinflation and growth are diverging across countries.
- Fiscal authorities need to embrace consolidation to reduce debt and rebuild buffers, while financing digital and green transformations.
- The global economy has proven remarkably resilient due to strong macroeconomic fundamentals, robust consumer and government spending, held-up labor markets, and normalized supply chains.
- Projections and medium-term outlook:
  - “We project over 3 percent growth this year and next.”
  - “Looking to the medium term, we expect global growth to be around 3 percent.”
  - Pre-COVID decade annual average: “3.8 percent.”
- Structural challenges: low productivity growth, high debt levels (especially for emerging and developing economies), and geopolitical tensions affecting trade and capital flows.
- Opportunities: digital and green transformations can boost productivity growth and living standards; deep structural reforms can enhance entrepreneurship, innovation, and economic performance.
- Regional note: In Asia inflation rose less and is coming down faster, so interest rates have not risen as much.

### China — a new era of high-quality growth
- Recent performance:
  - China saw a “strong post-Covid rebound in 2023, with growth exceeding five percent.”
- Medium-term role:
  - China will continue to be a key contributor to global economic growth despite headwinds from low productivity growth and an aging population.
- Reform potential and quantitative scenario:
  - “With a comprehensive package of pro-market reforms, China could grow considerably faster than a status quo scenario.”
  - That additional growth would amount to “a 20 percent expansion of the real economy over the next 15 years—in today’s terms, that is like adding US$ 3.5 trillion to the Chinese economy.”
- Core ingredients for high-quality growth:
  - Maintain sound macroeconomic fundamentals and strong institutions.
  - Address near-term challenges: transition the property sector to a more sustainable footing and reduce local government debt risks.
  - Reduce the stock of unfinished housing and give more space for market-based corrections in the property sector to accelerate solutions and lift consumer and investor confidence.
  - Shift toward higher reliance on domestic consumption by boosting household spending power.
  - Strengthen the social security system’s reach and increase benefits—“think of strengthening the pension system in a fiscally responsible way.”
  - Improve allocation of capital via a stronger business environment and a level playing field between private and state-owned enterprises.
  - Invest in human capital: education, life-long training, reskilling, and quality health care to raise labor productivity and incomes.
- AI and technology:
  - AI preparedness is immediate: four critical areas are digital infrastructure, human capital and labor markets, innovation, and regulation and ethics.
  - IMF analysis finds China “at the forefront of emerging economies in terms of AI preparedness,” with well-developed digital infrastructure providing a head start.
  - Recommended actions: establish a robust AI regulatory framework and strengthen economic ties with other innovative countries.
- Green transition:
  - China is the global leader in deploying renewable energy and is making rapid progress in green mobility.
  - Policy steps to improve decarbonization efficiency: sell a greater share of electricity at market prices and extend emissions trading system coverage to the industrial sector.

### Policy recommendations and reforms
- Macroeconomic and fiscal:
  - Preserve sound macroeconomic fundamentals and rebuild policy buffers while pursuing consolidation.
  - Tackle local government debt risks and property sector imbalances decisively.
- Structural and market reforms:
  - Implement comprehensive pro-market reforms to lift productivity and growth (see 20 percent/US$ 3.5 trillion scenario).
  - Strengthen the business environment and ensure a level playing field between private and state-owned enterprises.
- Human capital and social protection:
  - Expand social security reach and increase benefits where fiscally responsible, including pension reforms.
  - Scale up investments in education, life-long training, reskilling, and quality health care.
- Technology and innovation:
  - Build on digital infrastructure strengths, adopt robust AI regulation and ethics frameworks, and deepen ties with other innovative countries.
- Climate and green policies:
  - Advance market pricing of electricity and extend emissions trading system coverage to industry to improve decarbonization efficiency.

### International cooperation and the IMF’s role
- Cooperation is essential to address shared challenges—fragmentation, climate change, and debt—which disproportionately affect the most vulnerable.
- China’s contributions and engagement:
  - China has strengthened the IMF’s financial capacity through contributions to concessional lending instruments for low-income countries, the Resilience and Sustainability Facility, and capacity development initiatives.
  - China helped forge the agreement to increase the IMF’s permanent resources by “50 percent.”
  - China plays an important role in addressing debt distress in emerging and developing economies; further creditor work is needed to speed up debt relief and China’s continued strong engagement is welcomed.
- The IMF commits to being a partner to China through ongoing policy dialogue and mutual learning.

### Key statistics and figures (as stated)
- “Over 3 percent growth this year and next.”
- Medium-term global growth expectation: “around 3 percent.”
- Pre-COVID decade annual average global growth: “3.8 percent.”
- China 2023 growth: “exceeding five percent.”
- Pro-market reform scenario for China: “a 20 percent expansion of the real economy over the next 15 years” = “US$ 3.5 trillion.”
- IMF permanent resources increase: “50 percent.”

*Remarks by the Managing Director Kristalina Georgieva at the China Development Forum, March 24, 2024, Beijing.*

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## References

- [https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva](https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva)
- [People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)
- [IMF-World Bank Debt Sustainability Framework for Low-Income Countries -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/imf-world-bank-debt-sustainability-framework-for-low-income-countries)
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_Source: https://www.imf.org/en/news/articles/2024/03/24/sp032424-md-cdf-remarks_