The International Monetary Fund said that China’s economy could grow by $3.5 trillion over the next 15 year if its policy is reoriented to focus more on consumers.
Kristalina Georgeeva, managing director of the IMF, stated that China is at a crossroads. She said that China could either rely on policies that worked in the past, or invest for a new age of high-quality economic growth.
IMF analysis shows that a consumer-focused policy could grow the economy by 20%, or $3.5 trillion over the next 15 year. The IMF chief stated that China must take “decisive steps” to reduce its inventory of unfinished housing in order to achieve the goal.
Li Qiang, China’s No. 2 official and premier, made her remarks at the start of a two day business forum in Beijing. She said that the Chinese economy must rely more on domestic consumption in order to achieve high quality growth. Beijing should also consider “strengthening its pension system fiscally responsibly” to increase the purchasing power of families and individuals. She said that investing in human capital – in education, training for life and reskilling – and in quality healthcare would result in higher wages and productivity.
Over a hundred foreign investors and executives also attended the Forum, as well as many smaller meetings held in private with government officials. Apple’s CEO Tim Cook told the Chinese broadcaster CGTN he had an “outstanding meeting” with Li. He said, “I believe China is opening up and I am really happy to be here.” HSBC and ExxonMobil were also in attendance.
At the opening of this forum, government officials reiterated that China will achieve its 5-percent economic growth target this year. This is despite warnings by analysts that it could be too ambitious. The Chinese economy has been struggling with negative consumer and producer prices in recent months, leading to expectations that Beijing might need to provide direct fiscal stimuli to encourage consumers to continue spending.
Georgieva noted, however, fiscal authorities in the majority of countries were facing a difficult year. She said that they must embrace consolidation in order to reduce debt, rebuild buffers, and finance digital and green transformations to their economies.
Data released on Friday shows that foreign investment into China has decreased by less than 20% in the first two month of this year, compared to a year ago, despite the fact that Chinese officials maintain the economy is “open for business”. Li told the forum that China’s $140 billion plan for ultra-long government bond issuance would create a fund in order to encourage investment.
He told the delegates at the World Economic Forum that China offers multinational companies a market “supersized”, with 400 million middle class consumers. This number is expected to grow to 800 millions within a decade.