Written by 18:07 Business

I.M.F. Is Upbeat on China’s Growth but Questions Its Industrial Policy

The International Monetary Fund made sizable increases on Wednesday in its forecasts for China’s economic growth, while questioning the scale of the Chinese government’s assistance to export-focused industries.

The fund estimates that China will grow 5 percent this year and 4.5 percent in 2025. That is 0.4 percentage points more for each year than the fund predicted just six weeks ago.

China’s gross domestic output expanded 5.2 percent last year, as the economy rebounded after nearly three years of stringent pandemic policies that stifled growth. Many economists, including at the I.M.F., had anticipated that China would be held back this year by a severe contraction in the housing market and a slowdown in consumer spending.

Yet while property prices continued to fall and retail sales grew sluggishly, China powered ahead in the first three months of this year. Its economy expanded at an annual rate of about 6.6 percent because of booming increases in exports and strong factory investments.

The Chinese government is taking steps to address the housing crash, but faces enormous challenges. Years of overbuilding have resulted in four million new but unsold apartments and, by one conservative estimate, as many as 10 million that developers have sold but not finished building.

Many owners of vacant investment apartments also find themselves facing years of hefty mortgage payments but little chance the apartments will appreciate significantly in value.


Last modified: 31 May 2024