China’s economy is characterized by an ongoing real estate crisis and subdued external demand. The IMF expects lower growth in 2024 compared to the previous year.
The International Monetary Fund (IMF) expects the Chinese economy to grow less this year compared to 2023. The IMF economists expect growth of 4.6 percent. In the previous year the value was 5.4 percent.
After the zero-corona policy was ended, the economy of the second largest economy recovered. The reason for this was strong domestic demand, loose monetary policy and tax relief. While the IMF welcomed China’s “strong recovery” from the pandemic, it stressed that the ongoing adjustment in the real estate market would continue to weigh on private investment and consumer confidence.
The real estate sector in China in particular is an important pillar of growth. A court in Hong Kong recently ordered the dissolution of the heavily indebted real estate group China Evergrande. Beijing is currently trying to stabilize the market and has relaxed regulations for housing purchases and loans.
China’s future is fraught with risks
However, the IMF forecasts ever weaker growth in the coming years. For 2028, the fund assumes growth of only 3.4 percent. Weak productivity and an aging population created headwinds, it said.
According to the forecast, inflation is also expected to rise. However, the risks with regard to the economic outlook are great, according to the IMF. An unexpectedly strong contraction in the real estate sector could further weigh on private demand.
“Market friendly structural reforms” necessary
The IMF also made it clear that “market-friendly structural reforms” were needed to reduce economic risks in light of the forecast. According to the experts, additional funds need to be made available for the completion of apartments, and the government also needs to help developers adapt to a smaller real estate market.
This should make a stronger market-based price adjustment possible. In general, with regard to the economy, it is important for China to reduce trade restrictions, according to the IMF.