The rapid spread of COVID-19 in China dampened growth in 2022, but the country’s recent reopening has paved the way for a faster-than-expected recovery, the International Monetary Fund (IMF) stated during a press briefing on January 30.     

The reopening indicates less supply chains destructions, expanded global production and higher domestic demand as Chinese households are returning to normal daily activities and are starting to consume again, which will all add to global growth, IMF Chief Economist Pierre-Olivier Gourinchas said at the conference.  

According to the IMF’s newly released World Economic Outlook report, the outlook for the global economy is growing slightly brighter as it is projected to grow 2.9 percent this year, up from the October projection of 2.7 percent. The IMF expects global growth to speed up to 3.1 percent in 2024.  

The IMF projected China’s economy will grow by 5.2 percent in 2023, up from its October forecast of 4.4 percent, as the country’s economic activity and human mobility recover.  

“That’s good news for China and the world as the Chinese economy is now expected to contribute a quarter of global growth this year,” Diego A. Cerdeiro, a senior economist with the IMF’s Asia and Pacific Department, and Sonali Jain-Chandra, IMF mission chief for China, wrote in an article on February 3.  

Nevertheless, the IMF economists believe that the contraction in China’s real estate sector remains a major headwind and there’s still some uncertainty surrounding the evolution of COVID-19 in the country. For the long term, headwinds to growth include a shrinking population and slowing productivity growth, Cerdeiro and Jain-Chandra wrote. 

They noted that the Chinese economy needs comprehensive macroeconomic policies and structural reforms to secure its recovery and promote balanced, green and inclusive growth.   

“We recommend keeping fiscal policy neutral this year, with additional monetary policy accommodation helping secure the recovery amid muted inflation pressures and growth below its potential,” they wrote. “The orderly restructuring of troubled property developers will also help reduce risks.”   

With a shrinking labor force and diminishing returns to capital investment, growth in coming years will depend on boosting declining productivity growth, they added. 

Copyedited by Elsbeth van Paridon  

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