## Transcript of Press Briefing on China Article IV Consultation

_IMF News, May 30, 2024_

## Source details

**Canonical URL:** [Transcript of Press Briefing on China Article IV Consultation](https://www.imf.org/en/news/articles/2024/05/30/tr052924-transcript-of-press-briefing-on-china-article-iv-consultation)

## Other formats

- [Markdown version](/en/news/articles/2024/05/30/tr052924-transcript-of-press-briefing-on-china-article-iv-consultation/index.md)
- [Structured JSON version](/en/news/articles/2024/05/30/tr052924-transcript-of-press-briefing-on-china-article-iv-consultation/index.json)
- [Bundle manifest](/en/news/articles/2024/05/30/tr052924-transcript-of-press-briefing-on-china-article-iv-consultation/bundle-manifest.json)

## Bibliographic details
- Published: May 30, 2024

---

### Macroeconomic outlook and key projections
- GDP growth projections:
  - 5 percent in 2024.
  - 4.5 percent in 2025.
  - Upward revisions of 0.4 percentage points for both 2024 and 2025 versus the April World Economic Outlook projections.
  - Medium-term growth expected to slow to 3.3 percent (attributed to aging demographics and slower productivity growth).
- Inflation and output:
  - Inflation is expected to rise but stay low as output remains below potential.
  - Core inflation is projected to increase only gradually to average around 1 percent in 2024.
- Near-term assessment:
  - Strong first quarter GDP growth in 2024 supports upward revisions (first quarter GDP growth cited as 5.3 percent year-on-year).
  - Export growth in the first quarter cited at 5 percent, partly reflecting a correction from weak end-2023 export growth.
- Risks:
  - 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.

### Property sector, fiscal stance, and financial stability
- Property sector:
  - Ongoing housing market correction described as necessary to steer the sector toward a more sustainable path.
  - Authorities have implemented measures including lending support for affordable housing and measures to boost demand for finished homes.
  - Staff see scope for a more comprehensive policy package to address property sector issues, in particular:
    - Deploy central government resources to help homebuyers of pre-sold unfinished homes (options: complete homes or compensate, whichever is less costly, with appropriate safeguards).
    - Enable exit of insolvent developers from the market.
    - Allow greater price flexibility to stimulate housing demand and restore equilibrium.
- Fiscal policy recommendations:
  - Near-term fiscal policy should be geared to support domestic demand and mitigate downside risks.
  - Fiscal policy should prioritize providing one off central government financial support for the real estate sector.
  - 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.
  - China faces significant fiscal challenges, especially for local governments; sustained fiscal consolidation over the medium-term is needed to stabilise debt.
  - Restructuring unsustainable debt of local government financing vehicles (LGFVs) can help reduce fiscal strain.
- Monetary and exchange rate policy:
  - Monetary policy easing implemented so far in 2024 is welcome; scope exists for further easing given subdued inflation and output below potential.
  - Greater exchange rate flexibility would reduce deflation risks and help absorb external shocks.
- Financial stability measures:
  - Authorities have focused on vulnerabilities in the property sector, local government finances, and smaller financial institutions.
  - Recommendations include strengthening the bank resolution framework and strictly applying credential standards to enhance financial stability and mitigate risk.

### Trade, industrial policy, and multilateral implications
- Trade restrictions and fragmentation:
  - Large increase in trade restrictions: 3,000 trade restrictions were imposed in 2023 compared to 1,000 in 2019.
  - Early signs of fragmentation: trade across geopolitically aligned countries holding up better than across less aligned countries.
  - Potential global GDP impact:
    - If fragmentation is contained, cost could be less than half a percent of world GDP.
    - If severe decoupling occurs across blocks, the Fund estimates a potential global GDP loss of around 7 percent over the medium-term.
- Industrial policy and subsidies:
  - 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.
  - 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.
  - Recommendations:
    - Scale back sector-specific support where it causes misallocation.
    - Remove trade and investment restrictions that raise fragmentation pressures.
    - Improve transparency and assess the aggregate level of support provided to sectors across multiple levels of government.
- Multilateral trade system:
  - The preferred approach to addressing concerns about industrial policy and subsidies is multilateral — strengthening the World Trade Organization rather than unilateral actions.
  - 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.

### Structural reforms and medium-term policy priorities
- Key structural priorities to achieve high quality growth:
  - Rebalance the economy toward consumption by strengthening the social safety net.
  - Liberalize the services sector to boost growth and job creation.
  - Pursue people-centered policies: education and health care to raise structural growth and human capital.
  - Level the playing field among state-owned, private, and foreign firms; give markets a decisive role to boost productivity.
  - Boost productivity through reforms (market-oriented policies, regulatory alignment, business environment improvements).
- Green transition and financing:
  - China plays an important role in supporting debt restructuring in low-income countries and promoting the green transition.
  - Green investment and targeted subsidies can be useful to address market failures, but overuse can lead to misallocation.
  - 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.
  - Mobilizing private finance is essential given the scale of financing needs for the green transition; credible policy signals are required to attract private investment.

### Technical and data issues raised in the briefing
- Goods trade surplus discrepancy:
  - SAFE reports a surplus of about $600 billion while customs data reports over $800 billion for last year; this discrepancy appeared in 2021.
  - Causes discussed: customs data record physical movement of goods; balance of payments (BOP) records transactions when ownership changes between residents and non-residents.
  - 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.
- IMF governance and quotas:
  - 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.
  - Work on realignment for governance to reflect the current global economy is ongoing, to be addressed in subsequent reviews.

*Transcript of Press Briefing on China Article IV Consultation, May 29, 2024 — IMF Communications Department*

---


## 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)
- [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)

_Source: https://www.imf.org/en/news/articles/2024/05/30/tr052924-transcript-of-press-briefing-on-china-article-iv-consultation_