The International Monetary Fund on Wednesday urged China to increase vaccination rates against COVID-19 and provide more support to the struggling real estate sector to restore confidence and reduce risks of a global economic slowdown and high house prices.
In a statement after virtual meetings for its annual review of China's economic policies, the IMF said it would maintain GDP growth forecasts issued in October 1.
They forecast growth of 3.2% for 2022 and 4.4 percent in 2023, assuming a gradual lifting of China's strict zero-COVID strategy in the second half of next year.”
Although the zero-COVID strategy has become more agile over time, the mix of variants is Contagious and persistent vaccination gaps have led to the need for more frequent lockdowns, weighing on consumption and private investment, including housing," Gita Gopinath, the IMF's first deputy managing director, said in a statement.
By well prepared and increase vaccination rates and keep them high to maintain protection,” Gopinath added. Hopes for a quick reopening were clouded. The IMF said economic risks for China are sloping down due to headwinds from a global slowdown, higher energy prices and global restrictions.
In the longer term, the fund said, rising geopolitical tensions could fragment the global economy as China faces potential financial decoupling and restrictions on trade, foreign direct investment and access to technology.
The IMF recommended that China's fiscal policy should be neutral in 2023 after strong support this year, but should protect the recovery and facilitate a rebalancing towards higher domestic consumption.
He said China's monetary policy should remain accommodative, relying on measures based on the interest rate.
REAL ESTATE SUPPORT The Fund welcomed the authorities' recent support initiatives for China's declining real estate sector, including a lending program to support the completion of unfinished houses and forbearance to allow bad home loans.
"Building on these efforts, robust and well-funded additional mechanisms are required to complete problematic uncompleted projects and protect new pre-sale buyers from the risk of default while leniency programs should expire," Gopinath said.
The measures will help restore homebuyer confidence and facilitate market-based restructuring,” he said, adding that in the medium term, structural reforms in the sector and new savings models can help bring the market to a more sustainable size.
The IMF renewed also his long-standing call for more market-based reforms in China, including ensuring "competitive neutrality" between private and state-owned companies.
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