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IMF warns China’s economic recovery could falter

Global economy 'poised for a soft landing': IMF
Source: IMF

The International Monetary Fund warned on Tuesday that China’s economic recovery could falter without more support for its ailing property sector but maintained its growth forecast for this year at 4.6 percent.

That is below the official target set by Beijing of “around five percent” for gross domestic product (GDP) growth in 2024, and well below the double-digit increases recorded in recent decades.

The property sector in the world’s second-biggest economy entered a period of unprecedented challenges in 2020, when authorities tightened developers’ access to credit in a bid to reduce mounting debt.

The vital industry is now under great strain, with major companies including Evergrande and Country Garden on the verge of bankruptcy and falling prices dissuading consumers from investing in property.

“In China, without a comprehensive response to the troubled property sector, growth could falter, hurting trading partners,” the IMF warned in its World Economic Outlook report.

Measures introduced by Beijing to support the sector — which has long accounted for more than a quarter of China’s GDP — have had little effect so far.

The IMF’s warning came on the same day Chinese authorities reported first-quarter growth of 5.3 percent, exceeding analysts’ expectations despite persistent economic challenges.

“Domestic demand will remain lackluster for some time unless strong measures and reforms address the root cause,” the IMF wrote in its report, saying that “credit booms and busts never resolve themselves quickly, and this one is no exception”.

Major Western economies led by the United States have expressed increasing concern in recent months about production overcapacity in China, where they say state subsidies for electric vehicles, solar panels and batteries are resulting in unfair competition overseas.

US Treasury Secretary Janet Yellen conveyed those worries to Chinese interlocutors during a trip to Beijing this month — a visit intended to stabilise economic ties between the two countries despite tough geopolitical competition.

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Agence France-Presse (AFP) is a French international news agency headquartered in Paris, France. Founded in 1835 as Havas, it is the world's oldest news agency.

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