According to Kristalina Georgieva, Beijing has room to support the world’s second-largest economy.
China’s economic stimulus measures would be critical to the global recovery, according to the director of the International Monetary Fund, who warned that a prolonged downturn would have serious consequences.
Despite a weakening forecast for the world’s second-largest economy, IMF Managing Director Kristalina Georgieva said on Thursday that Beijing had flexibility to adopt measures to boost growth.
Georgieva said policy support could include “shifting the focus toward vulnerable households to strengthen consumption, which can also help support China’s climate goals by steering economic activity to lower-carbon sectors,” in a video speech to the annual Boao Forum for Asia in China’s Hainan province.
Stronger policy initiatives in the property sector might also contribute to a more balanced recovery, according to Georgieva.
In recent days, major financial organizations such as UBS, Bank of America, Barclays, and Standard Chartered have lowered their growth projections for 2022, casting doubt on Beijing’s 5.5 percent aim.
The IMF lowered China’s growth prediction to 4.4 percent from 4.8 percent on Tuesday. Beijing’s rigorous “dynamic zero COVID” approach has put much of China on lockdown, interrupting factory productivity and limiting broad public consumption.
According to a recent report by investment research firm Gavekal, all but 13 of China’s top 100 towns by economic importance are under pandemic restrictions, with the severity of limits increasing.
According to government data, China’s economy grew 4.8 percent year over year in the first quarter.
Although the amount exceeded expectations, it only includes a portion of the ongoing lockdown in Shanghai, China’s most populated metropolis and financial hub, where citizens have complained of food shortages and made rare public shows of opposition.
Supply chains that span the globe
“China had already been shifting from a shipper to a shopper, with a shift away from exports and toward domestic spending and investment,” Tim Harcourt, chief economist at the University of Technology Sydney’s Institute for Public Policy and Governance, told Al Jazeera.
“They also needed to slow the economy down to cater for environmental concerns.
As a result, the recent COVID outbreak has accomplished this. However, due of China’s critical involvement in global supply networks, the global economy must continue to keep a close eye on the country. In an effort to support growth, the People’s Bank of China announced a reduction in the amount of deposits banks must maintain in reserve last week, releasing around 530 billion yuan ($82 billion) of liquidity into the economy, which fell short of market forecasts. Despite recent forecasts of interest rate reduction, the central bank has left rates unchanged since January, indicating officials are wary about fueling excessive debt.
Even while the rest of the world learns to live with the virus, Chinese President Xi Jinping has supported the “zero COVID” strategy.
Xi said China’s economy was resilient and asked for collaboration to “protect people’s lives and health” at the same forum on Thursday.
Source: Aljazeera
