International Monetary Fund (IMF) Director Kristalina Georgieva speaks during the 2024 China Development Forum at Diaoyutai State Guesthouse on March 24, 2024 in Beijing, China.
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According to International Monetary Fund Managing Director Kristalina Georgieva, China currently has two options: return to its old economic policies or opt for reforms to boost growth.
“China is facing a fork in the road: rely on policies that have worked in the past or update its policies for a new era of high-quality growth,” Georgieva said at the China Development Forum in Beijing on Sunday.
“With a comprehensive package of free-market reforms, China could grow significantly faster than in a status quo scenario,” she said, according to prepared remarks from the IMF.
This could trigger growth that would be “equivalent to a 20% expansion of the real economy over the next 15 years – equivalent to a $3.5 trillion increase in China's economy by today's standards,” she added.
While the country has experienced a recovery after the coronavirus crisis – with growth of over 5% in 2023 – it faces factors such as low productivity growth and an aging population, according to the Bulgarian economist.
Still, she added: “In the medium term, China will continue to be an important driver of global economic growth.”
At this year's two-day China Development Forum, which began on Sunday, Chinese officials expect more than 100 foreign participants, including CEOs of major foreign companies and executives from the IMF and World Bank.
During a keynote speech at the forum, Chinese Premier Li Qiang pledged efforts to promote “high-quality development,” “intensify macro policy adjustments” and expand domestic demand, according to state media reports. He also promised a “higher level of openness” in addressing challenges.
Additionally, officials reportedly promised further protection for foreign-funded companies as foreign investment flows to China dry up.
The measures coincide with other steps Beijing has taken in recent weeks to boost confidence among foreign investors and companies as the country pursues a growth target of about 5% this year.
The Chinese government had previously admitted that the 2023 target “will not be easy”, especially as the country continues to face overcapacity and easing price pressures amid a housing and debt crisis.
At the World Economic Forum in Davos earlier this year, Georgieva outlined some short- and long-term challenges facing the world's second-largest economy, warning that China needed structural reforms to boost growth and boost domestic consumption and confidence.
Separately, the IMF said in November it expected China's economy to grow 4.6% in 2024, warning of ongoing real estate problems.
On Sunday, Georgieva highlighted the “most pressing near-term challenges” for China, including “shifting the real estate sector to a more sustainable basis and reducing local government debt risks.”
To avoid this scenario, China must take “decisive steps” to complete unfinished houses stranded by bankrupt developers and reduce risks from local government debt, the IMF chief said on Sunday.
In this way, the country can “accelerate the resolution of current problems in the real estate sector and increase the confidence of consumers and investors,” she added.
“A key feature of high-quality growth must be greater dependence on domestic consumption,” Georgieva said, adding that this “depends on increasing the purchasing power of individuals and families.”