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IMF: China rebound a boon for entire globe

By Zhao Huanxin in Washington and Zhou Lanxu in Beijing  | | Updated: 2023-04-14 22:56
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The skyline of Beijing. [Photo/VCG]

The strong rebound of the Chinese economy is a boon to global growth, the International Monetary Fund chief said as she cautioned global policymakers against the risk of supply chain security leading to a new Cold War.

The IMF, in its World Economic Outlook released on Tuesday, forecast China's growth to stay at 5.2 percent this year, a 0.8 percentage point upward revision to IMF's October projection, as it said the world is experiencing a "rocky recovery".

"We have been pleased to see this rebound of China not only for China, of course for China, but also because of China's role in the world economy," IMF Managing Director Kristalina Georgieva told a news conference on Thursday at the IMF and World Bank spring meetings that run through Sunday.

"China this year is going to contribute about one-third of global growth. We calculated that 1 percent more growth in China translates into 0.3 percent more growth for the economies that are connected to China," the IMF chief said.

At another news conference on Thursday, World Bank Group President David Malpass said China's rebound in growth is a pickup that "adds to global growth".

Yi Gang, governor of the People's Bank of China, the nation's central bank, also told G20 finance ministers and central bank governors during the spring meetings that China is expected to achieve GDP growth of around 5 percent this year.

The Chinese economy is stabilizing and recovering with moderate inflation and "positive changes" in the real estate market, Yi said.

The country is willing to implement a common debt treatment framework with all relevant stakeholders, the PBOC quoted Yi as saying in a statement on Friday, after Yi met with his counterparts from several developing countries facing debt stress, including Pakistan, Ethiopia, Sri Lanka and Zambia.

Georgieva, who met Premier Li Qiang during her visit to China at the end of last month, said she was encouraged to hear from the Chinese leadership a commitment to constructively engage and to do its part for the countries that are pressed to restructure their debts.

"What impressed me was Premier Li Qiang's very clear message on China continuing to reopen and pursue reforms that can strengthen the prospects for China's growth," she said.

Georgieva said she also discussed with the Chinese leadership the "significant challenges", including how to manage the real estate sector, where actions are being taken but more may be needed.

The IMF managing director also warned global policymakers not to let supply chain security precipitate a new Cold War, as security of supplies and the reliable functioning of global supply chains are taking a "new, higher priority seat" in economic discussions following the COVID-19 pandemic and amid the ongoing conflict in Ukraine.

"The question is, can we be more determined to enhance security of supplies but not push the world that far that we are into a second Cold War?" she said. "I believe it is possible."

Georgieva said that trade fragmentation resulting from the rising geopolitical tensions could increase financial stability risks, potentially reducing global economic output by between 0.2 percent and 7 percent.

"If we fail to be more rational, then people everywhere would be worse off. The middle class in each country would pay a price," Georgieva said. "So a bit more coolheadedness would take us a long way."

Krishna Srinivasan, director of the IMF's Asia and Pacific Department, noted that China's reopening will provide fresh momentum to the rest of Asia, a dynamic region that would contribute more than 70 percent to global growth this year.

China's boost to Asia's growth will mostly stem from the country's consumption demand rather than investment, according to Srinivasan.

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