China needs to “reinvent itself” with economic policies to speed resolution of its property market crisis and boost domestic consumption, IMF managing director Kristalina Georgieva said yesterday.
“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 said in remarks to a meeting of senior Chinese officials and company executives.
Officials who spoke at the opening of the China Development Forum expressed confidence China would hit its economic targets, including growth of about 5 percent this year, and pledged further support for companies.
Photo: AP
However, those commitments stopped short of the more sweeping changes urged by the IMF. Georgieva said an analysis by the IMF showed that a more consumer-centered policy mix could add US$3.5 trillion to China’s economy over the next 15 years.
To do that China would need to take “decisive” steps to complete unfinished housing stranded by bankrupt developers and to reduce risks from local government debt, the IMF chief said.
“A key feature of high-quality growth will need to be higher reliance on domestic consumption,” Georgieva said. “Doing so depends on boosting the spending power of individuals and families.”
Other economists have also urged a new growth model for China. However, the IMF remarks were significant in coming at the outset of a two-day meeting where Beijing is looking to push the message China is open for business.
Foreign investment flows into China shrank about 20 percent in the first two months of the year, data released on Friday showed, and officials have been stepping up efforts to attract investors.
Last year, foreign direct investment into China contracted by 8 percent, reflecting a shaky economic recovery and tensions with the US and its allies.
China’s Cabinet last week unveiled steps intended to win investment, including expanded market access and pilot programs to encourage investment in science and technology.
Chinese Premier Li Qiang (李強) yesterday said China’s previously announced US$140billion plan to issue ultra-long bonds would create a fund to spur investment and stabilize growth.
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