BEIJING, CHINA – China’s economic slowdown is likely to persist in the coming years as the Asian giant struggles with sagging productivity and a rapidly aging population, the International Monetary Fund (IMF) said on Friday.
The world’s second-largest economy last year saw some of its slowest growth in decades, as a debt crisis in the property sector added to geopolitical tensions and weakening global demand.
And an IMF report on Friday forecast growth to decline further to 3.5 percent by 2028 “amid headwinds from weak productivity and population aging”, adding that “uncertainty surrounding the outlook is high”.
It previously forecast growth of 4.6 percent for this year.
Driving the slowdown is a years-long crisis in the country’s real estate market, once a key growth pillar but now mired in debts that may threaten China’s financial system.
Property giant Evergrande has become a symbol of the sector’s woes, racking up astronomical debts of more than $300 billion.
A court in Hong Kong this week issued an order that should kickstart the liquidation of Evergrande’s overseas assets, though the company insisted the decision would not affect its domestic operations.
And the IMF report warned a continued slowdown in the property market “could further weigh on private demand and worsen confidence”.
Sonali Jain-Chandra, Mission Chief for China at the IMF’s Asia and Pacific Department, told a media briefing on Friday that the sector was “in the midst of a multi-year transition to a smaller and more sustainable size”.
“Some of this adjustment has happened, but we’re still in the midst of it,” she explained, adding that “more needs to be done” to prop up the ailing sector.
China’s economy grew by 5.2 percent last year, according to official statistics, beating a modest target of around five percent.
Exports — long a key driver of growth — notched their first decline in seven years, dragged down by notable tensions with Western countries and a decline in global demand.
Chinese officials are due to release their growth target for 2024 in March.