New York/Beijing: The International Monetary Fund (IMF) has released a report projecting a sustained economic slowdown in China for the next four years. Beijing grapples with a myriad of challenges, including an aging population, rising unemployment, and a looming property crisis.
The IMF’s latest report, unveiled on Friday, predicts a decline in China’s economic growth to 4.6 per cent in the current year, down from the 5.2 per cent recorded in 2023. The forecast suggests a further decrease to 3.4 per cent by the year 2028.
One of the significant concerns for the Chinese economy is the property market, underscored by a recent Hong Kong court decision directing the Chinese property giant Evergrande to liquidate, as reported on Monday.
IMF’s analysis, disclosed on Friday, indicates that real estate investment may witness a substantial drop of 30 to 60 per cent over the next decade compared to 2022 levels, as reported by VOA News.
The IMF report cautions, “Absent a comprehensive restructuring policy package for the troubled property sector, real estate investment could drop more than expected, and for longer, with negative implications for domestic growth and trading partners.”
Christopher Tang, Senior Associate Dean of Global Initiatives at the University of California Los Angeles Anderson School and Faculty Director of the UCLA Center for Global Management, emphasized the close relationship between the real estate crisis and Chinese consumers’ spending habits. Tang stated in an email to VOA, “As they see their equity in their home investment declining, they spend less on everything – lower consumer spending, the demand falls which reduces production and hence slower economic growth.”
Tang further stressed the need for China to implement new demand-side economic policies and ease market regulations to counteract the impact of the real estate market crisis.
The IMF recommends that the Chinese government encourage citizens to explore new investment avenues and implement market-oriented reforms to stimulate China’s economy, according to VOA News.
Ali Wyne, the senior research and advocacy adviser for US-China at the International Crisis Group, pointed to local government debt and tensions between China and Western nations as additional factors contributing to the predicted economic downturn in China, as reported by VOA News.
Wyne stated in an email to VOA, “The evidence thus far does not suggest that a hard landing is in the offing, but it does suggest that China’s growth headwinds are more intractable than they were a decade ago or even at the outset of the 2020s.”
Despite Beijing’s efforts to restore confidence in the economy, Chinese stocks faced a tumultuous week, marking their worst performance in years, according to CNN. The Shanghai Composite Index saw a significant 6.2 per cent drop, the most substantial weekly loss since October 2018, while the Shenzhen Component Index recorded an 8.1 per cent decline, marking its largest drop in three years. Year-to-date, both indexes have lost more than 8 per cent and 15 per cent, respectively.
The CSI 300 index, comprising 300 major stocks listed in Shanghai and Shenzhen, also suffered a 4.6 per cent decline, marking its worst week since October 2022, according to CNN. The index is down 7 per cent since the beginning of the year.
