China said it will face a “crossroads” when officials meet Reuters chief executives

By Colleen Howe and Jing Xu

BEIJING (Reuters) – China needs to “reinvent itself” with economic policies to speed up resolution of the property market crisis and boost domestic consumption and productivity, Kristalina Georgieva, managing director of the International Monetary Fund, said on Sunday.

“China faces a crossroads: rely on policies that have worked in the past, or reinvent itself for a new era of high-quality growth,” Georgieva said in a meeting with senior Chinese officials and global business executives. .

Officials at the opening of the China Development Forum expressed confidence that China will achieve its economic goals, including growth of about 5 percent this year, and pledged further support for companies in strategically important sectors, a area that Chinese President Xi Jinping has dubbed “new productive forces.”

But these commitments stopped short of the more radical changes urged by the IMF. Georgieva said an IMF analysis showed that a more consumer-focused policy mix could add $3.5 trillion to China’s economy over the next 15 years. If achieved, such stimulus would be equivalent to adding output equivalent to more than double the size of South Korea’s economy.

To do so, China should take “decisive” measures to complete unfinished homes abandoned by bankrupt developers and reduce risks from local government debt, the head of the International Monetary Fund said.

“A key feature of high-quality growth will have to be a greater reliance on domestic consumption,” said Georgieva, a Bulgarian economist. “To achieve this it is necessary to increase the spending power of individuals and families”.

Other economists have also called for a new growth model for China. But the IMF’s remarks were significant because they came at the start of a two-day meeting in which Beijing is trying to spread the message that China is open for business.

Foreign investment flows into China shrank by nearly 20% in the first two months of the year, data released Friday showed, and officials have stepped up efforts to attract investors at a time when many companies are trying to “reduce risks” in supply chains. and operations outside China.

In 2023, foreign direct investment in China contracted by 8%, reflecting a shaky economic recovery and tensions with the United States and its allies over a range of issues.

Apple (NASDAQ:) CEO Tim Cook, the highest-profile executive at the Beijing event, told Chinese state broadcaster CGTN that he had an “exceptional” meeting with Chinese Premier Li Qiang.

“I think China is really opening up,” Cook told a CGTN interviewer on the sidelines of the meeting. He later said that Apple’s China-based suppliers have helped drive gains in more sustainable manufacturing, including reducing water consumption and recycling metals like aluminum and cobalt.

Stephen von Schuckmann, a board member and ZF Group executive who oversees the auto supplier’s battery power operations, said the company is committed to China, which is a world leader in auto sales and production electrical.

“Any wording and hype about an exodus in the supply chain is not what we follow,” he said in a comment published by CGTN. “We’re invested. We’re here to stay.”

More than 100 foreign executives and investors attended the China Development Forum and a series of smaller closed-door sessions with Chinese officials on Friday and Saturday.

Last week, the Chinese government unveiled measures aimed at attracting investment, including greater market access and pilot programs to encourage investment in science and technology.

Li said on Sunday that China’s previously announced $140 billion plan to issue ultra-long bonds would create a fund to stimulate investment and stabilize growth.

Other officials have highlighted Xi’s commitment to promoting investment in “new productive forces,” sectors that officials say include networked electric vehicles, spaceflight and cutting-edge drug development.