Washington, US–The International Monetary Fund plans to tell China to boost weak domestic consumption, address its troubled real estate sector, and rein in local government debt, problems that are dragging down both Chinese and global growth, IMF Managing Director Kristalina Georgieva told a media outlet.
The Fund will strongly urge Beijing to shift its growth model away from debt-fueled infrastructure investment and real estate, she said.
The IMF in July forecasted China’s 2023 growth rate at 5.2% and 4.5% in 2024 but warned it could be lower given the contraction in real estate.
Georgieva said it was important for China to address consumer confidence in its real estate sector by financing the completion of apartments that buyers have already paid for, rather than bailing out troubled developers.
The IMF is preparing to issue a new set of global growth forecasts ahead of IMF and World Bank annual meetings Oct. 9-15. Georgieva added separately the institutions would decide on Monday whether to proceed with the meetings in earthquake-hit Morocco.
The new forecasts are expected to reflect concerns about anemic GDP growth around the world, as most large economies are still lagging pre-pandemic growth rates.
The United States is the only large economy to have recovered pre-pandemic growth, while China is four percentage points below pre-pandemic trends, Europe is down two percentage points, and the world is down three percentage points.
With China generating about a third of global growth this year, its growth rate “matters to Asia, and it matters to the rest of the world,” Georgieva said.
Asked about U.S. Commerce Secretary Gina Raimondo’s recent comment that some U.S. firms viewed China as “uninvestible”, Georgieva said: “There is some outflow from China. It is a trend that we need to carefully monitor, how it evolves over time.”
She added there were some areas – including the digital economy and green technologies – that remained attractive to investors.
She cautioned it was important to ensure China’s big push on electric vehicles was not done using subsidies in a way that created unfair competition.
