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China's economy is at a “fork in the road” between choosing between past policies or “market-oriented reforms” to boost growth, IMF Managing Director Kristalina Georgieva said on Sunday, as calls grow for Beijing to do more to boost domestic demand to boost.
Addressing China's top international economic conference in Beijing, Georgieva said the global economy had shown remarkable resilience to shocks but was heading toward growth that was “weak by historical standards” in the medium term as low productivity growth and high debt hindered progress braked.
“China is facing a fork in the road: rely on the policies that have worked in the past or reinvent itself for a new era of high-quality growth,” Georgieva said, according to a copy of her speech at the China Development Forum in Beijing.
This year's forum was opened by China's Prime Minister Li Qiang, the country's second most senior official, and will be attended by global business leaders including Apple's Tim Cook, ExxonMobil's Darren Woods and HSBC's Noel Quinn.
Li promised that Beijing would prepare regulations to make it easier for foreign companies to access markets and boost domestic consumption.
The conference comes as China's trading partners face oversupply risks in key industries such as electric vehicles and steel, which could prompt manufacturers to dump surplus goods on global markets.
Beijing has set a 5 percent growth target 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 due to a decline in real estate and population decline.
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China responded by promising to invest more in manufacturing and infrastructure, but economists say the country needs to do more to boost domestic demand.
Georgieva's use of the term “high-quality growth” echoes the rhetoric of Chinese President Xi Jinping, who has urged Chinese industry to move up the value chain into more sophisticated technology and value-added industries.
She said with a “comprehensive package of free-market reforms” China could grow its economy by 20 percent, or $3.5 trillion, over the next 15 years.
This would include reducing the inventory of unfinished housing left by the housing crisis and “creating more room for market-based corrections in the real estate sector.”
Strengthening China's pension system in a “fiscally responsible manner” could help boost the purchasing power of individuals and families, she said, while reforms to ensure a level playing field between private and state-owned companies could improve capital allocation.
“Investments in human capital – in education, lifelong training and reskilling – and quality healthcare will lead to higher labor productivity and higher incomes,” she said.
On the global economy, she said that “strong macroeconomic fundamentals” in most developed and emerging economies had helped weather the shocks of recent years.
However, she said 2024 would be challenging for financial authorities in most countries. “They must embrace consolidation to reduce debt and rebuild buffers, while financing the digital and green transformation of their economies,” she said.
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