Unlock the Publisher’s Digest for free
Roula Khalaf, editor of the FT, selects her favorite stories in this weekly newsletter.
China’s economy is at a “crossroads” between choosing past policies or “market-friendly reforms” to unlock growth, IMF Managing Director Kristalina Georgieva said on Sunday, as calls grow for Beijing to do more to revive domestic demand.
Speaking at China’s top international business conference in Beijing, Georgieva said the global economy has shown remarkable resilience to shocks, but is headed for “weak by historical standards” growth in the medium term, as low Productivity growth and high debt levels have held back progress.
“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 at the China Development Forum in Beijing, according to a copy of her speech . .
Inaugurated by Chinese Premier Li Qiang, the country’s second-ranking official, this year’s forum was attended by global CEOs including Apple’s Tim Cook, ExxonMobil’s Darren Woods and HSBC’s Noel Quinn.
Li promised that Beijing will prepare rules to facilitate market access for foreign companies and efforts to increase domestic consumption.
The conference comes as China’s trading partners grapple with risks of oversupply in major industries, including electric vehicles and steel, which could push manufacturers to dump excess goods on global markets.
Beijing has set a growth target of 5% for this year, the same as 2023 but low compared to previous years, and analysts expect the economy to slow further in the medium term on the back of a housing downturn and population decline.
China has responded by promising to invest more in manufacturing and infrastructure, but economists are calling on it to do more to stimulate domestic demand.
Georgieva’s use of the term “high-quality growth” draws on the rhetoric of Chinese President Xi Jinping, who has urged Chinese industry to move up the value chain into more sophisticated, value-added technology sectors.
He said that with a “comprehensive package of pro-market reforms” China could add 20% or $3.5 trillion to its economy over the next 15 years.
These would include reducing the stock of unfinished homes left over from the housing crisis and “giving more room for market-based corrections in the housing sector”.
Strengthening China’s pension system in a “fiscally responsible” way could help increase the spending power of individuals and families, he said, while reforms to level the playing field between private and state-owned enterprises could improve capital allocation.
“Investments in human capital – in education, lifelong learning and reskilling – and quality healthcare will ensure higher labor productivity and higher incomes,” he said.
Turning to the global economy, he said “strong macroeconomic fundamentals” in most advanced and emerging countries have helped overcome the shocks of recent years.
But he said 2024 will be challenging for tax authorities in most countries. “They must embrace consolidation to reduce debt and rebuild reserves, and at the same time finance the digital and green transformations of their economies,” she said.