The International Monetary Fund (IMF) has recently upgraded its forecast for China’s economic growth this year to 5%, up from the previous estimate of 4.6%. This revision was made following a review of China’s first-quarter economic performance and recent policy measures implemented by the Chinese government. The IMF now projects that China’s economy will expand by 4.5% in 2025, compared to the previous forecast of 4.1%. However, the long-term outlook suggests a deceleration in growth to 3.3% by 2029, attributed to factors such as an aging population and slower productivity growth.

China’s economy outperformed expectations in the first quarter, registering a growth rate of 5.3%, driven by robust export activity. Despite this positive momentum, data for April indicated sluggish consumer spending, although there was an uptick in industrial activity. In response to challenges faced by the real estate sector, Chinese authorities introduced sweeping measures to support the market, including the removal of a floor on mortgage rates. While these policy interventions were deemed “welcome” by the IMF, they emphasized the necessity for more comprehensive actions to address existing vulnerabilities.

Gita Gopinath, the IMF’s first deputy managing director, highlighted the importance of mobilizing central government resources to protect buyers of pre-sold unfinished homes and expedite the completion of such projects. This targeted approach aims to facilitate the resolution of issues related to insolvent developers. Moreover, Gopinath advocated for greater price flexibility in the real estate market, coupled with vigilant monitoring to mitigate potential macro-financial risks. The IMF’s release emphasized the need for near-term macroeconomic policies that focus on supporting domestic demand and minimizing downside risks.

To achieve high-quality growth in the long run, structural reforms are deemed essential to counter prevailing challenges and address underlying imbalances within the economy. President Xi Jinping of China emphasized the promotion of “high-quality, sufficient employment,” particularly emphasizing the enhancement of employment support policies for college graduates and young individuals. This commitment to fostering a conducive environment for sustainable employment aligns with the broader objective of promoting inclusive growth and economic stability.

The IMF’s revised growth forecast for China reflects cautious optimism regarding the country’s economic trajectory. While short-term indicators exhibit resilience and promise, addressing structural vulnerabilities and implementing targeted policy measures remain imperative to ensure sustainable and inclusive growth in the future. By aligning macroeconomic policies with long-term structural reforms and employment initiatives, China can navigate challenges effectively and foster a robust and balanced economic landscape.

Finance

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