{
  "title": "Transcript of Press Briefing on China Article IV Consultation",
  "publication": "IMF News, May 30, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/05/30/tr052924-transcript-of-press-briefing-on-china-article-iv-consultation",
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  "summary": "Transcript of Press Briefing on China Article IV Consultation",
  "publishDate": "2024-05-30",
  "sections": [
    {
      "heading": "Macroeconomic outlook and key projections",
      "content": "- GDP growth projections:\n  - 5 percent in 2024.\n  - 4.5 percent in 2025.\n  - Upward revisions of 0.4 percentage points for both 2024 and 2025 versus the April World Economic Outlook projections.\n  - Medium-term growth expected to slow to 3.3 percent (attributed to aging demographics and slower productivity growth).\n- Inflation and output:\n  - Inflation is expected to rise but stay low as output remains below potential.\n  - Core inflation is projected to increase only gradually to average around 1 percent in 2024.\n- Near-term assessment:\n  - Strong first quarter GDP growth in 2024 supports upward revisions (first quarter GDP growth cited as 5.3 percent year-on-year).\n  - Export growth in the first quarter cited at 5 percent, partly reflecting a correction from weak end-2023 export growth.\n- Risks:\n  - Overall risks to the outlook are tilted to the downside, including from a greater or longer than expected property sector adjustment and increasing fragmentation pressures in global trade."
    },
    {
      "heading": "Property sector, fiscal stance, and financial stability",
      "content": "- Property sector:\n  - Ongoing housing market correction described as necessary to steer the sector toward a more sustainable path.\n  - Authorities have implemented measures including lending support for affordable housing and measures to boost demand for finished homes.\n  - Staff see scope for a more comprehensive policy package to address property sector issues, in particular:\n    - Deploy central government resources to help homebuyers of pre-sold unfinished homes (options: complete homes or compensate, whichever is less costly, with appropriate safeguards).\n    - Enable exit of insolvent developers from the market.\n    - Allow greater price flexibility to stimulate housing demand and restore equilibrium.\n- Fiscal policy recommendations:\n  - Near-term fiscal policy should be geared to support domestic demand and mitigate downside risks.\n  - Fiscal policy should prioritize providing one off central government financial support for the real estate sector.\n  - Excluding this one-time property sector package, a neutral fiscal stance in 2024 would balance tradeoffs among supporting domestic demand, mitigating deflation risks, and managing unfavorable debt dynamics.\n  - China faces significant fiscal challenges, especially for local governments; sustained fiscal consolidation over the medium-term is needed to stabilise debt.\n  - Restructuring unsustainable debt of local government financing vehicles (LGFVs) can help reduce fiscal strain.\n- Monetary and exchange rate policy:\n  - Monetary policy easing implemented so far in 2024 is welcome; scope exists for further easing given subdued inflation and output below potential.\n  - Greater exchange rate flexibility would reduce deflation risks and help absorb external shocks.\n- Financial stability measures:\n  - Authorities have focused on vulnerabilities in the property sector, local government finances, and smaller financial institutions.\n  - Recommendations include strengthening the bank resolution framework and strictly applying credential standards to enhance financial stability and mitigate risk."
    },
    {
      "heading": "Trade, industrial policy, and multilateral implications",
      "content": "- Trade restrictions and fragmentation:\n  - Large increase in trade restrictions: 3,000 trade restrictions were imposed in 2023 compared to 1,000 in 2019.\n  - Early signs of fragmentation: trade across geopolitically aligned countries holding up better than across less aligned countries.\n  - Potential global GDP impact:\n    - If fragmentation is contained, cost could be less than half a percent of world GDP.\n    - If severe decoupling occurs across blocks, the Fund estimates a potential global GDP loss of around 7 percent over the medium-term.\n- Industrial policy and subsidies:\n  - Industrial policy can address market failures but, if permanent or indiscriminate, can lead to distortions and misallocation of domestic resources and potential spillovers to trading partners.\n  - Evidence of retaliatory subsidy behavior: when one of the U.S., EU, or China puts a subsidy in place, there is a 75 percent probability the other country retaliates with another subsidy within the next twelve months.\n  - Recommendations:\n    - Scale back sector-specific support where it causes misallocation.\n    - Remove trade and investment restrictions that raise fragmentation pressures.\n    - Improve transparency and assess the aggregate level of support provided to sectors across multiple levels of government.\n- Multilateral trade system:\n  - The preferred approach to addressing concerns about industrial policy and subsidies is multilateral — strengthening the World Trade Organization rather than unilateral actions.\n  - Continued engagement, open dialogue (including working groups between the U.S. and China), and cooperative progress in areas such as services trade and climate are constructive paths forward."
    },
    {
      "heading": "Structural reforms and medium-term policy priorities",
      "content": "- Key structural priorities to achieve high quality growth:\n  - Rebalance the economy toward consumption by strengthening the social safety net.\n  - Liberalize the services sector to boost growth and job creation.\n  - Pursue people-centered policies: education and health care to raise structural growth and human capital.\n  - Level the playing field among state-owned, private, and foreign firms; give markets a decisive role to boost productivity.\n  - Boost productivity through reforms (market-oriented policies, regulatory alignment, business environment improvements).\n- Green transition and financing:\n  - China plays an important role in supporting debt restructuring in low-income countries and promoting the green transition.\n  - Green investment and targeted subsidies can be useful to address market failures, but overuse can lead to misallocation.\n  - The Fund advocates carbon pricing as an effective, fiscally responsible tool to support the green transition, complemented by targeted subsidies and measures to protect the vulnerable.\n  - Mobilizing private finance is essential given the scale of financing needs for the green transition; credible policy signals are required to attract private investment."
    },
    {
      "heading": "Technical and data issues raised in the briefing",
      "content": "- Goods trade surplus discrepancy:\n  - SAFE reports a surplus of about $600 billion while customs data reports over $800 billion for last year; this discrepancy appeared in 2021.\n  - Causes discussed: customs data record physical movement of goods; balance of payments (BOP) records transactions when ownership changes between residents and non-residents.\n  - The gap exists for all countries following BOP manual principles; detailed analysis to appear in the Staff Report to be published in a few months.\n- IMF governance and quotas:\n  - Completion of the 16th Quota Review was highlighted: quotas were increased proportionately by 50 percent for everybody to restore a predominantly quota-based financing model.\n  - Work on realignment for governance to reflect the current global economy is ongoing, to be addressed in subsequent reviews.\n\nTranscript of Press Briefing on China Article IV Consultation, May 29, 2024 — IMF Communications Department\n\n---\n\n\n References\n\n- People's Republic of China and the IMF\n- IMF Policy Advice -- A Factsheet\n- IMF Quotas -- A Factsheet\n- The IMF and the World Trade Organization -- A Factsheet\n- Transcripts\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/05/30/tr052924-transcript-of-press-briefing-on-china-article-iv-consultation"
    }
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    "Published: May 30, 2024",
    "GDP growth projections:",
    "Inflation and output:",
    "Near-term assessment:",
    "Risks:",
    "Property sector:",
    "Fiscal policy recommendations:",
    "Monetary and exchange rate policy:",
    "Financial stability measures:",
    "Trade restrictions and fragmentation:",
    "Industrial policy and subsidies:",
    "Multilateral trade system:",
    "Key structural priorities to achieve high quality growth:",
    "Green transition and financing:",
    "Goods trade surplus discrepancy:",
    "IMF governance and quotas:",
    "[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)",
    "[IMF Quotas -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2022/imf-quotas)",
    "[The IMF and the World Trade Organization -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2022/imf-and-the-world-trade-organization)",
    "[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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