International Monetary Fund. Asia and Pacific Dept
China has enjoyed decades of impressive growth, which has significantly improved living standards and largely eradicated extreme poverty. The growth has, however, been accompanied by widening imbalances and rising vulnerabilities, as excessive investment in infrastructure and housing has resulted in rising debt levels among property developers, local governments (LG), and local government financing vehicles (LGFVs). The authorities have proactively sought to contain developer leverage. This has contributed to a significant, but needed, adjustment in the property market that continues to weigh on economic activity, including through its impact on LG finances. Amid these structural challenges, the authorities have appropriately announced their goal to transition to high quality growth while tackling risks from the property sector and LG debt.
International Monetary Fund. Asia and Pacific Dept
Following an impressive recovery from the initial impact of the pandemic, China’s growth has slowed significantly in 2022. It remains under pressure as more transmissible variants have led to recurring outbreaks that have dampened mobility, the real estate crisis remains unresolved, and global demand has slowed. Macroeconomic policies have been eased appropriately, but their effectiveness has been diminished by a focus on enterprises and increasingly less effective traditional infrastructure investment rather than support to households. The pandemic and its impacts have also been a setback to economic rebalancing toward private consumption and to reducing greenhouse gas emissions. A slowdown in growth-enhancing reforms against the backdrop of increasing geoeconomic fragmentation pressures stand in the way of a much-needed lift to productivity growth, weighing on China’s medium-term growth potential.
International Monetary Fund. Asia and Pacific Dept
China’s recovery is well advanced—but it lacks balance and momentum has slowed, reflecting the rapid withdrawal of fiscal support, lagging consumption amid recurrent COVID-19 outbreaks despite a successful vaccination campaign, and slowing real estate investment following policy efforts to reduce leverage in the property sector. Regulatory measures targeting the technology sector, intended to enhance competition, consumer privacy, and data governance, have increased policy uncertainty. China’s climate strategy has begun to take shape with the release of detailed action plans. Productivity growth is declining as decoupling pressures are increasing, while a stalling of key structural reforms and rebalancing are delaying the transition to “high-quality”—balanced, inclusive and green—growth.
International Monetary Fund. Asia and Pacific Dept
The Chinese economy continues its fast recovery from the health and economic crisis as a strong containment effort and macroeconomic and financial policy support have mitigated the crisis impact and helped the economy rebound. However, growth is still unbalanced as the recovery has relied heavily on public support while private consumption is lagging. Rising financial vulnerabilities and the increasingly challenging external environment pose risks to the outlook. Important reforms have progressed despite the crisis, but unevenly across key areas.