IMF Urges China to Stimulate Consumption Amid Prolonged Real Estate Slump

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IMF Urges China to Boost Consumption as Real Estate Falters, India’s Economy Gains Momentum

China’s traditional reliance on real estate investment has reached its limits, prompting the International Monetary Fund (IMF) to advocate for a shift toward bolstering consumption to reignite economic recovery. According to Krishna Srinivasan, the IMF’s director of the Asia and Pacific department, the stagnation in China’s real estate sector has been a primary contributor to the country’s sluggish growth.

Despite China’s efforts to rebalance its economy towards consumption-driven growth, demand has remained lackluster, failing to regain its pre-pandemic momentum. The IMF’s recent downward revision of China’s 2023 and 2024 growth forecasts signals significant concerns for the global economy, emphasizing the criticality of China’s economic trajectory.

While the IMF’s projections appear somewhat cautious, other experts, such as Erica Tay from Maybank, hold a more reserved view, expressing worries about the sustainability of China’s recovery. Tay highlighted concerns over potential fatigue in consumer spending, particularly as signs of a slowdown in various sectors, including travel and durable goods, have begun to emerge.

Alicia Garcia-Herrero, the chief economist for Asia-Pacific at Natixis, emphasized structural challenges beyond the pandemic, noting that an aging population contributes to diminished consumption and uncertain expectations for the future in China.

Contrastingly, the IMF remains optimistic about India’s economic trajectory, projecting a robust growth rate of 6.3% for 2023, attributing this growth to burgeoning consumer demand and positive sentiment. However, Garcia-Herrero cautioned that India still faces multiple challenges, including a widening current account deficit, resurging inflation, and escalating geopolitical tensions.

Despite the divergent trajectories of the two Asian economic giants, the IMF’s report underscores the global economy’s tenuous state, with growth remaining sluggish and uneven, requiring careful consideration of various risk factors and uncertainties.