IMF upgrades China growth outlook

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The IMF has raised its forecasts for China’s economic growth, citing stronger policy support from Beijing, as Chinese regulators used a gathering of top Wall Street heads in Hong Kong to push back against investor gloom over the country.

The fund said China’s gross domestic product would grow 5.4 per cent in 2023, upgrading its previous forecast of 5 per cent. It came as China released weaker than expected export data, adding to recent mixed readings on retail spending, manufacturing and consumer prices.

“The authorities have introduced numerous welcome measures to support the property market,” the IMF’s first deputy managing director Gita Gopinath said in a statement. “But more is needed to secure a quicker recovery and lower economic costs during the transition.” 

Beijing has been battling to improve confidence in the economy, which has struggled to rebound after stringent Covid-19 lockdowns last year, a property sector meltdown and weakness in export industries.

Foreign investors have dumped tens of billions of dollars worth of Chinese stocks and bonds this year, a trend exacerbated by much higher interest rates in the US.

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The IMF said it had also upgraded its forecast for China’s growth next year from 4.2 per cent to 4.6 per cent but cautioned that weakness in the property sector and subdued external demand would persist.

Over the medium term, GDP growth was projected to decline gradually to about 3.5 per cent by 2028 because of weak productivity and an ageing population, said Gopinath.

“A strategy to contain the risks from the ongoing property sector adjustment and manage local government debt is needed to lift sentiment and boost near-term prospects,” the fund said. “Supportive macroeconomic policies should complement these efforts.”

But at a Hong Kong investor conference on Tuesday, one of the territory’s flagship events for the global financial community, China’s top officials said they were not “too” worried about the country’s economy. 

He Lifeng, China’s vice-premier and a powerful Communist party official overseeing China’s economic and finance affairs, said in a pre-recorded message that China would achieve its official growth target of 5 per cent this year.

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“You may ask me, are you worried?” said another official, Zhang Qingsong, deputy governor at the People’s Bank of China, who attended in person, on China’s economy. 

“Not too much,” he told the event, which was attended by some of the most powerful executives in global finance, including Morgan Stanley’s James Gorman, Goldman Sachs’s David Solomon, Citadel’s Ken Griffin and Mark Rowan of Apollo Global Management.

Zhang said China’s economic fundamentals were stable and its government debt was “lower than [in] many other advanced economies”. 

Many of China’s largest developers have defaulted on their debts, prompting calls for a sector-wide bailout. But Zhang described this as “a natural selection and market-clearing process”.

“Having said that, we need to carefully manage the pace to avoid a sharp downturn and unintended consequences . . . I prefer to let the market play its role, but do policy adjustments if necessary,” Zhang said. “We are quite optimistic about the future of China’s property market.” 

The positive messaging from regulators came after one-third of listed Chinese companies reported third-quarter results that fell short of expectations — the most in half a decade, according to an analysis by Morgan Stanley.

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China’s benchmark CSI 300 index has fallen more than 6 per cent this year.

But Wang Jianjun, vice-chair of the China Securities Regulatory Commission, the market watchdog, said the domestic debt and equity markets were “full of opportunities right now”.

“It’s never too late to catch the China train — you can still ride the dragon to heaven,” Wang said.

China’s exports dropped 6.4 per cent in October compared with the same period a year earlier, the sixth consecutive month of declines and worse than a Reuters survey of analysts that forecast a 3 per cent fall. 

In one positive sign, however, China’s imports expanded year-on-year for the first time since February, rising 3 per cent.

“The disappointing exports point to external headwinds to the still fragile recovery, while the much-better-than-expected imports suggest domestic demand could be bottoming out on policy support,” said Citi analysts in a note.

Additional reporting by Chan Ho-him in Hong Kong