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China's economy is at a „fork in the road” where it must choose between past policies or „pro-market reforms” to unlock growth, IMF Managing Director Kristalina Georgieva said on Sunday, amid growing calls for Beijing to boost domestic demand. .
Speaking at China's premier international business conference in Beijing, Georgieva said the global economy had shown significant resilience to shocks but was headed for „weak by historical standards” growth over the medium term as low productivity growth and high debt levels limited progress.
„China is facing a fork in the road – trust policies that have worked in the past or reinvent itself for a new era of high-quality development,” Georgieva said at the China Development Forum in Beijing.
China's premier, opened by the country's number two official Li Qiang, this year's forum is attended by global chief executives including Apple's Tim Cook, ExxonMobil's Darren Woods and HSBC's Noel Quinn.
Li promised that Beijing would prepare regulations to ease market access for foreign companies and efforts to boost domestic consumption.
„We will focus on expanding domestic demand,” Li said, adding that China would „accelerate the development of a modern industrial system.”
China's trading partners face higher supply risks in key industries including electric vehicles and steel, which could prompt manufacturers to dump excess supplies on global markets.
Beijing has set a growth target of 5 percent this year, the same as in 2023 but lower than in previous years, and analysts expect the economy to slow further in the medium term on the back of a property slump and population decline.
China has responded by pledging to invest more in manufacturing and infrastructure, but economists are calling for more to be done to stimulate domestic demand.
Georgieva's term „high-quality development” borrows from the rhetoric of China's President Xi Jinping, who has urged Chinese industry to move up the value chain in more advanced technology and value-added industries.
He said China could add 20 per cent, or $3.5tn, to its economy over the next 15 years with a „comprehensive package of pro-market reforms”.
These include reducing the stock of unfinished homes left over from the real estate crisis and „allowing more room for market-based corrections in the property sector.”
Strengthening China's pension system with „fiscal responsibility” would help increase the spending power of individuals and households, while reforms to ensure a balance between private and state-owned enterprises could improve capital allocation.
„Investments in human capital – education, lifelong training and reskilling – and quality healthcare will deliver higher labor productivity and higher incomes,” he said.
On the global economy, he said „strong economic fundamentals” in many advanced and emerging countries helped them weather the shocks of the past years.
But 2024 will be a challenge for fiscal authorities in most countries, he said. „They need to embrace consolidation to reduce debt and rebuild buffers, while financing digital and green transformations of their economies,” he said.