Kristalina Georgieva says Beijing has room for action to support world’s second largest economy.
China’s measures to support the economy will be crucial to the global recovery, the head of the International Monetary Fund said, warning that a prolonged slowdown would have significant spillover effects.
IMF Managing Director Kristalina Georgieva said Thursday Beijing has scope to take measures to shore up growth amid the deteriorating outlook for the world’s second-largest economy.
In a video address ahead of the annual Boao Forum for Asia in China’s Hainan province, Georgieva said policy support could “include shifting the focus to vulnerable households to boost consumption, which can also help support China’s climate goals by supporting the.” Economic activity is channeled towards lower-carbon sectors”.
“Stronger policy efforts in the real estate sector can also help ensure a balanced recovery,” Georgieva said.
Big financial institutions including UBS, Bank of America, Barclays and Standard Charted have revised down their growth forecasts for 2022 in recent days, casting doubt on Beijing’s target of around 5.5 percent.
On Tuesday, the IMF lowered its forecast for China to 4.4 percent from 4.8 percent. Beijing’s tough “Dynamic Zero COVID” strategy has forced much of China into lockdown, disrupting production at factories and restricting consumption by the general public.
According to a recent analysis by investment research firm Gavekal, all but 13 of China’s top 100 cities by economic size are under pandemic restrictions, with controls increasing in intensity.
China’s economy grew 4.8 percent year-on-year in the first quarter, according to government data. While the number beats expectations, it only covers a small period of the ongoing lockdown in Shanghai, China’s most populous city and financial capital, where residents have complained about food shortages and have rarely shown public dissent.
Global Supply Chains
“China had already shifted from a shipper nation to a buyer nation, with a focus away from exports towards domestic consumption and investment,” said Tim Harcourt, chief economist at the Institute for Public Policy and Governance at the University of Technology Sydney Al Jazeera.
“They also had to slow down the economy to address environmental concerns. So the recent COVID outbreak has done just that. But the global economy still needs to keep an eye on China because of its pivotal role in global supply chains.”
Last week, the People’s Bank of China announced a cut in deposits banks are required to hold in reserve to support growth, freeing around 530 billion yuan ($82 billion) of liquidity into the economy – below market expectations. Despite expectations of rate cuts in recent weeks, the central bank has held interest rates steady since January, suggesting policymakers remain cautious about fueling excessive debt.
Chinese President Xi Jinping has repeatedly defended the “zero-COVID” approach even as the rest of the world learns to live with the virus.
Speaking at the same forum on Thursday, Xi said China’s economy remains resilient and called for cooperation to “defend people’s lives and health.”
Comments are closed.