China's economy faces “high uncertainty” in 2024 as the IMF forecasts 4.6% growth and calls for more data transparency

“Staff estimates that GDP in 2025 could fall by 1.8 percent compared to the baseline scenario in such an adverse scenario, which involves a sharper and longer decline in the real estate sector [of 4 per cent].”

08:36

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The outlook was included in the review of the IMF's Article IV consultation, which took place in China over a month-long period in October and November last year. Its Article IV mission sends economists to member countries to monitor economic and financial policies and make recommendations.

China's recovery from the coronavirus pandemic has been patchy and weighed down by one ongoing downturn in the real estate market, a local government debt crisis, weak demand and increased geopolitical tensions.

The IMF said further growth and earnings shocks given high levels of debt in the real estate sector and some local governments could lead to broader balance sheet stress and weaker lending capacity, including at smaller local financial institutions.

The institution also raised data transparency issues with Chinese authorities during its visit last year, including the suspension of its youth unemployment data.

The National Bureau of Statistics (NBS) has now revised the unemployment figures for the 16 to 24 age group. Publication will resume in January after a six-month ban.

The IMF also pointed to “significant” gaps in quarterly GDP data, general government figures and details on extra-budgetary units, including local government financing vehicles used by municipalities to borrow money from the balance sheet.

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According to the IMF, there were also discrepancies between official sources in balance of payments and customs trade data.

“Greater transparency” is needed in China's foreign exchange interventions and in its accounting methods for public sector foreign assets to “help explain the increasing divergence between changes in official foreign assets and cumulative changes in foreign reserves recorded in the balance of payments,” it said IMF added.

In recent years, the growth of China's foreign exchange reserves on the balance sheet of the People's Bank of China has been found to be different from the foreign exchange reserves reported in its balance of payments data.

The trade surplus data from the Chinese customs authority also differed significantly from the balance of payments figures, which reflect the same data.

02:31

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The IMF's executive director for China, Zhang Zhengxin, issued a statement as part of the review addressing some of the concerns.

Zhang defended Beijing's measures to support its struggling real estate sector, saying the IMF's forecast for the property market was in some ways “too pessimistic.”

Zhang said the real estate sector has “stabilized and recovered, and its negative impact on the economy will continue to gradually diminish in the future.”

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China “has always fully complied with our agreements and commitments to the IMF regarding data disclosure and provision,” Zhang added.

Zhang said China will continue to “expand” big data collection and improve quality and transparency to better support policy-making needs, pointing to the signing of a memorandum of understanding between the IMF and NBS in November as evidence of its commitment to improving its “data problem”.

China's use of government subsidies was also included in discussions between Chinese officials and the IMF.

The IMF has warned that the increasing use of subsidies by some of the world's largest economies has contributed to a significant increase in global trade tensions.

Industrial policies, including domestic subsidies and trade restrictions, are becoming increasingly common across G20 economies. IMF In the review, the IMF said China's state intervention and use of industrial policies to develop indigenous technologies and strengthen independence can lead to overcapacity in target sectors, distorting resource allocation and creating an uneven playing field compared to private companies.

“Industrial policies, including domestic subsidies and trade restrictions, are becoming increasingly common across G20 economies,” the IMF said.

“While such interventions may be justified when there are obvious market failures, they also risk triggering retaliation from trading partners, leading to a slippery slope that fragments global supply chains.”