The International Monetary Fund (IMF) has revised its growth forecast for China, reducing its projection for 2024 to 4.8%, down 0.2 percentage points from its July estimate.
This adjustment comes amid ongoing challenges in China’s property market, with the IMF warning of potential further deterioration.
The agency’s report emphasized that the property sector’s decline could impact global economic stability, citing risks of reduced consumer confidence and lower domestic demand if the situation persists.
The outlook for 2025 also sees a decrease, with growth expected to reach 4.5%.
China’s property market slump
The IMF highlighted the challenges posed by China’s real estate market, noting that continued price corrections and reduced investment could pose a significant threat to the global economic landscape.
Historical parallels, such as Japan’s property crisis in the 1990s and the US housing market collapse in 2008, underscore the risks of an unchecked downturn in China’s real estate sector.
According to the IMF, a deepening crisis could lead to reduced household consumption and lower overall economic activity.
IMF’s latest growth projections for China
In its recent report, the IMF adjusted China’s growth forecast for this year to 4.8%, down from 5.0% in its previous estimate.
For 2025, the growth outlook has also been trimmed to 4.5%.
The Washington-based institution emphasized that while recent measures by Chinese authorities could provide some support, they have yet to fully address the underlying issues in the property market.
2024 growth forecast: Revised down to 4.8%
2025 growth forecast: Projected at 4.5%
Key risks: Further property market contraction and impact on the global economy
China has introduced several initiatives to address its slowing economic growth and the real estate sector’s slump.
In September, the People’s Bank of China reduced the reserve requirement ratio, aiming to inject liquidity into the economy.
Shortly after, Chinese leaders announced plans to halt the decline in the property market and stimulate recovery.
Major cities such as Guangzhou and Shanghai have also implemented measures to encourage home buying.
China’s Minister of Finance, Lan Fo’an, indicated that the country might increase its debt levels to provide further economic stimulus.
He hinted at policy adjustments that could expand the government’s deficit, allowing for more aggressive support.
The housing ministry has expanded its “whitelist” of real estate projects, aiming to accelerate bank lending for unfinished developments.
These measures, while aimed at stabilizing the property market, carry risks of straining public finances.
‘Going in the right direction’
The IMF has incorporated some of these measures into its latest forecasts but remains cautious about their potential impact.
Pierre-Olivier Gourinchas, the IMF’s chief economist, noted that while China’s efforts to support growth are “going in the right direction,” they have not significantly altered the growth trajectory.
The more recent measures, yet to be fully evaluated, could introduce upside risks to China’s economic output.
However, third-quarter economic data revealed a 4.6% growth, slightly above market expectations, suggesting a mixed outlook.
Third-quarter GDP growth: 4.6%, above the 4.5% forecast
Potential upside: Unassessed measures could boost output
Ongoing concerns: Balance between economic support and long-term stability
The IMF’s report also warns that additional government interventions could place further pressure on China’s fiscal health.
Efforts to boost exports through targeted subsidies might strain relations with key trading partners, potentially escalating trade tensions.
The report underscores the delicate balance China must strike between stabilizing its economy and maintaining international trade relationships.
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