China must transform its economic strategies to expedite the resolution of its property market crisis and enhance domestic consumption and productivity, asserted Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF), on Sunday.
“China faces a fork in the road — rely on the policies that have worked in the past, or reinvent itself for a new era of high-quality growth,” Georgieva articulated during remarks delivered at a gathering of senior Chinese officials and executives from global corporations.
Opening the China Development Forum, officials expressed assurance in China’s ability to achieve its economic objectives, including a projected 5% growth rate for the current year.
They also committed to providing further assistance to companies operating in strategically significant sectors, a focal point that Chinese President Xi Jinping has labeled as “new productive forces.”
However, these commitments fell short of the comprehensive changes advocated by the IMF. Georgieva highlighted that an IMF analysis indicated a policy mix centered more on consumers could inject $3.5 trillion into China’s economy over the ensuing 15 years.
Such an accomplishment would represent a substantial economic boost, equivalent to more than twice the size of South Korea’s economy.
To achieve this, China must take “decisive” actions to address unfinished housing projects left stranded by bankrupt developers and to mitigate risks associated with local government debt, emphasized the IMF chief.
“A key aspect of high-quality growth will entail a greater emphasis on domestic consumption,” stated Georgieva, a Bulgarian economist. “This necessitates enhancing the purchasing power of individuals and households.”
Several economists have also called for a new growth model for China. However, the remarks from the IMF hold particular significance as they were made at the outset of a two-day meeting during which Beijing aims to convey the message that China is open for business.
Foreign investment inflows into China witnessed a nearly 20% decline in the first two months of the year, as indicated by data released on Friday. Consequently, officials have intensified efforts to attract investors, especially at a time when many companies are seeking to “de-risk” their supply chains and operations by diversifying away from China.
In 2023, foreign direct investment into China contracted by 8%, reflecting a fragile economic recovery and escalating tensions with the United States and its allies on various fronts.
At the Beijing event, Tim Cook, the CEO of Apple, engaged in discussions with China’s Premier Li Qiang, describing the meeting as “outstanding,” according to reports from state broadcaster CGTN.
Cook, as quoted in state-run CCTV Finance, announced that Apple’s Vision Pro will be introduced to the mainland China market this year, further indicating the company’s plans to increase research and development investment in China.
Expressing optimism, Cook remarked to a CGTN interviewer on the sidelines of the event, “I think China is really opening up.” He later highlighted the contributions of Apple’s China-based suppliers in advancing sustainable manufacturing practices, including reductions in water consumption and the recycling of metals like aluminum and cobalt.
Meanwhile, Stephen von Schuckmann, a board member and executive at ZF Group overseeing the auto supplier’s battery-drive operations, reaffirmed the company’s commitment to China.
Noting China’s leading position in electric car sales and production globally, he emphasized ZF Group’s dedication to the market.
In remarks published by CGTN, he dismissed any speculation or sensationalism about a supply chain exodus, asserting, “We’re fully committed. We’re entrenched here for the long term.”
The China Development Forum saw participation from over 100 overseas executives and investors, engaging in various closed-door sessions with Chinese officials held on Friday and Saturday.
Recent initiatives revealed by China’s cabinet aim to attract investment, featuring measures such as widened market access and pilot programs geared towards fostering investment in science and technology.
During his address on Sunday, Li announced that China’s previously announced $140-billion plan to issue ultra-long bonds would establish a fund aimed at catalyzing investment and fostering economic stability.
Moreover, other officials emphasized Xi’s unwavering commitment to promoting investment in “new productive forces,” encompassing industries like networked electric vehicles, space exploration, and cutting-edge pharmaceutical development.
