China could add $3.5 trillion to its economy over the next 15 years if the country enacts a package of pro-market reforms, the International Monetary Fund's (IMF) chief said.
This additional growth would amount to a 20 per cent expansion of China's real economy if the country takes steps to put its property sector on more sustainable footing, reduce government debt risks and boost reliance on domestic consumption, Kristalina Georgieva told the China Development Forum in Beijing.
“China is poised to face a fork in the road – rely on the policies that have worked in the past, or update its policies for a new era of high-quality growth,” she said.
“With a comprehensive package of pro-market reforms, China could grow considerably faster than a status quo scenario.”
The world's second-largest economy grew by 5.2 per cent last year, slightly higher than the government estimate, following a slow recovery from the Covid-19 pandemic. China's underwhelming response in bailing out the battered property sector also contributed in pushing the pace of growth in the country to its weakest level in more than 30 years.
The IMF expects Chinese gross domestic product growth to slow to 4.2 per cent this year. China's government has set a GDP expansion target of around 5 per cent in 2024.
China is a vital contributor to the global economy's growth momentum, particularly amid current geopolitical tensions that are affecting trade and capital flows. The global economy is projected to grow just over 3 per cent this year and the next, below the annual average of 3.8 per cent in the decade before the Covid-19 pandemic, according to IMF data.
The Asian country is also a key trade and economic partner for countries in the Middle East. In 2023, China retained its status as the UAE’s leading non-oil trade partner, followed by India, the US, Saudi Arabia and Turkey, according to UAE government data. The UAE's trade with China last year grew 4.2 per cent.
The UAE is China’s second-largest trading partner and the largest export market in the Arab region, Zhang Yimeng, China's Ambassador to the UAE, told state news agency Wam in November.
China is also the world's largest crude importer and any slowdown in its energy consumption can exert downward pressure on oil demand growth.
Pro-market reform measures
In a keynote speech at the forum, Chinese Premier Li Qiang told global investors that the prospects for the long-term development of the Chinese economy remain unchanged as the country has strong fundamentals, according to China state broadcaster CGTN.
He acknowledged that many investors are concerned about risks in China’s property sector and local government debt, but said “some difficulties and problems are not as serious as people think”.
Steps taken to limit risks in those areas have shown positive development, he added.
The IMF urged China to take “decisive steps” to reduce the stock of unfinished housing and to allow for market-based corrections in the property sector.
Such measures would “accelerate the solution to the current property sector problems and lift up consumer and investor confidence”, Ms Georgieva said.
China must also increase its reliance on domestic consumption by boosting the spending power of individuals and families.
The country's social security system has more “room to expand” its reach further and increase benefits – by strengthening the pension system “in a fiscally responsible way”, the IMF chief said.
While China is leading emerging economies in AI preparedness, establishing a robust AI regulatory framework and strengthening economic ties with other innovative countries will help China power ahead, Ms Georgieva said.
China also has “enormous potential” in advancing the green economy, she said, noting that China is already a global leader in deploying renewable energy and making fast progress on green mobility.
Selling a bigger share of electricity at market prices and extending the coverage of the emissions trading system to the industrial sector would make China’s decarbonisation efforts even more efficient, Ms Georgieva said.
The “transition from high rates to high quality of growth is the right fork in the road to take and China is determined to do so”, she said.
“As the government recognises, high-quality development ultimately depends on reforms.”
