Economic engine: Cargo ships at Qingdao port in China. — AFP
Beijing: China will likely remain the biggest contributor to global growth this year and next despite recent economic headwinds from the real estate sector, the International Monetary Fund (IMF) says.
Steven Barnett, senior resident representative of the IMF in China, said last Friday, although the fund has revised down its gross domestic product growth forecast for China, the country is expected to contribute roughly one-third of global growth this year and next.
According to the IMF’s World Economic Outlook (WEO) report in October, global economic output is forecast to expand by 3% this year, to which China is expected to contribute 0.9 percentage point, Barnett said.
He made the remarks at a launch of the publication in Beijing last Friday. The event was organised by the IMF Resident Representative Office in China and the International Monetary Institute at the Renmin University of China.
By comparison, the United States is forecast to contribute 0.3 percentage point while India’s contribution might be 0.5 percentage point, Barnett told China Daily on the sidelines of the event.
In 2024, China is forecast to contribute 0.8 percentage point of the 2.9% global growth, just under one-third and still higher than 0.2 percentage point of the United States and 0.5 percentage point of India, he said.
The WEO, published lastTuesday, has lowered the 2023 economic growth forecast for China to 5% from 5.2%, citing the pressures brought by the weakness in the real estate sector.
According to Zou Lan, head of the People’s Bank of China’s (PBoC) monetary policy department, the country’s real estate market has recently seen positive changes, with reviving housing market transaction activity in key cities and marginal improvements in home sales and market expectations.
In terms of credit, real estate development loans and personal mortgages issued by major banks increased by more than 100 billion yuan in September compared with August, Zou said at a news conference last Friday.
Zou also said the central bank’s efforts to reduce the interest burden of existing mortgages have made rapid progress as 49.73 million in mortgages – representing 98.5% of the mortgages eligible for interest rate reduction and worth 21.7 trillion yuan in total – had interest rates reduced during the week starting Sept 25.
The weighted average interest rate of those mortgages decreased by 0.73 percentage point on average to a weighted average of 4.27%, Zou said, adding the reduced interest-rate burden will help boost investment and consumption.
While China faces real estate headwinds, it has the scope to boost the economy by reorienting fiscal stimulus to consumer spending and implementing further monetary accommodation given the lack of inflationary pressure, Barnett said.
To boost medium-term growth, it is critical for China to accelerate structural reforms, without which China’s growth could slow to 3.4% in 2028, resulting in a slightly lower contribution to global growth of less than a quarter, Barnett said.
Ruan Jianhong, a PBoC spokeswoman, said China’s central bank will continue to implement a sound monetary policy in a targeted and effective manner, aiming for overall and lasting improvements in economic performance.
Ruan said the country’s macroeconomic leverage ratio came in at 291% for the second quarter of the year, up 9.4 percentage points compared with the end of last year and up 1.5 percentage points from the end of the first quarter. — China Daily/ANN
