China's economy to grow by 4.2% in 2023: IMF

Near-term price pressures are expected to remain muted as the output gap closes only gradually and sectoral demand-supply imbalances are expected to remain small despite re-opening. The current account surplus is expected to narrow to 1.3 per cent of gross domestic product (GDP) in 2023 from 2.1 per cent in 2022 on the back of weaker growth in main trading partners, relatively lower spending on durable goods in advanced economies, and a gradual resumption of Chinese overseas travel, according to a press release by the IMF.

In response to slowing growth momentum, macroeconomic policies appropriately turned expansionary in 2022. On the fiscal side, the main measures included a series of tax and other relief measures for small and medium-sized enterprises (SMEs) and spending on infrastructure investment projects, with the augmented cyclically adjusted primary deficit being estimated to have increased by 2.2 percentage points of potential GDP.

Monetary policy has become moderately accommodative following modest interest rate-based easing measures, cuts to the reserve requirement ratio, adjustments to deposit rate guidance policies that have helped lower deposit rates, and the use of credit policies to steer credit to SMEs and other borrower segments. The authorities have steadily stepped up support measures for the property sector, but much-needed developer restructuring continues to be slow.

Structural policy trends are clouding medium-term growth prospects amid weak productivity growth, in large part because of the role of low-productivity state-owned enterprises (SOEs) and declining business dynamism. Reforms securing competitive neutrality between SOEs and privately owned firms have been lacking, while SOEs are being tasked to make advances in strategically important sectors and technologies affected by growing geoeconomic fragmentation pressures, further burdening them with responsibilities. While China is a world leader in renewable energy, the unbalanced recovery and extreme weather events have made the achievement of near-term climate goals more challenging.

ALCHEMPro News Desk (NB)