China Shouldn't Tighten Macro-economic Policies: IMF

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2023-02-03 HKT 18:15

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  • The IMF says the Chinese economy is "still operating below potential". File photo: AP

    The IMF says the Chinese economy is "still operating below potential". File photo: AP

The mainland should avoid a premature tightening of macro-economic policies as its economy is not yet performing at its full potential despite rebounding from Covid-19, International Monetary Fund (IMF) officials said on Friday.

"Key structural reforms should be re-accelerated to lift China's potential growth," the officials told reporters at an online news conference accompanying the launch of its annual assessment of the country’s economy.

In its report, the IMF stressed that factors that saw economic growth slow significantly in 2022 could hamper economic performance this year unless properly addressed.

According to the fund's latest projections published on January 31, the world's second-largest economy will expand by 5.2 percent this year, compared with 3 percent in 2022.

The country’s economy is "still operating below potential," according to Thomas Helbling, deputy director for the fund's Asia and Pacific department, who cautioned that "the support provided in 2022 will expire," and that the IMF recommends China adopt a "neutral fiscal stance with the composition of spending shifting towards households."

The State Council, which functions as the country's cabinet, on January 28 vowed to promote consumption recovery as a major driver of the economy.

IMF officials on the call pressed the need for policymakers to implement wide-ranging structural changes to the economy – such as ensuring a level playing field between private firms and state-owned enterprises – as "without reforms, we currently estimate growth to fall below 4 percent over the next five years".

The fund’s officials are also anticipating significant increases in outbound mainland travel and tourism in 2023, as well as domestic consumption, particularly in catering and other contact-intensive industries that "are still operating well below capacity". (Reuters)

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