China’s economy rebounds, IMF calls for productivity-driven growth

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26th March 2023 – (Washington) China’s economy is experiencing a strong rebound, contributing about one-third of global growth in 2023, said Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF) at the China Development Forum 2023 in Beijing. The news will be a welcome lift to the world economy, which is still struggling with uncertainties and risks of geoeconomic fragmentation and rising financial instability, according to Georgieva.

Despite the impressive economic rebound, Georgieva urged China to make more policy efforts to raise productivity and rebalance the economy away from investment and toward consumption-driven growth. This, she said, will be more durable and helpful to climate goals. The IMF managing director highlighted the importance of policies that support the growth of small and medium-sized enterprises, promote innovation, and improve the business environment.

China’s economic rebound comes at a time when the global economic prospects remain challenging, with uncertainties exceptionally high due to the risks of geoeconomic fragmentation and rising financial instability at the time of higher debt levels. Rapid transitions from a prolonged period of low interest rates to much higher rates, which are necessary moves to fight inflation, inevitably generate stresses and vulnerabilities.

Response actions taken by policymakers in advanced economies have eased market stress to some extent. However, uncertainty remains high, and the IMF warns that policymakers must remain vigilant. The organisation is assessing potential implications for the global economic outlook and financial stability, with a focus on low-income countries with a high level of debt. The rapid transition from low to high-interest rates has already generated stresses and vulnerabilities, as seen in recent developments in the banking sector of some advanced economies.

Georgieva called on policymakers to remain vigilant, saying that uncertainty remains high and underscores the need for continued vigilance. She added that the IMF is closely monitoring potential risks to global financial stability, including rising debt levels in low-income countries, which could exacerbate the effects of the pandemic. Georgieva also highlighted the importance of multilateral cooperation, saying that it is essential to address global challenges and support sustainable economic growth.