China has the potential to experience significant economic growth over the next 15 years if it implements a comprehensive package of pro-market reforms, according to International Monetary Fund (IMF) Managing Director Kristalina Georgieva. She estimates that with these reforms, China could see a 20% expansion in the real economy, equivalent to adding $3.5 trillion to the Chinese economy. Georgieva highlighted the importance of steps to improve the sustainability of the property sector, reduce debt risks, and focus more on domestic consumption to drive this growth.
Addressing Property Sector Challenges
Georgieva emphasized the need for decisive action to address issues in the property sector, such as reducing the stock of unfinished housing and allowing market-based corrections to take place. These measures could help solve current problems in the sector and boost consumer and investor confidence. Premier Li Qiang also expressed intentions to optimize property policy, indicating a commitment to addressing challenges in the housing market.
Promoting Domestic Consumption
To sustain economic growth, China must shift towards relying more on domestic consumption. Georgieva suggested increasing incomes, enhancing families’ spending power, and expanding the social security system, including the pension system, in a fiscally responsible manner. By doing so, China can stimulate consumer spending and reduce its dependency on external demand.
Georgieva recommended that China establish a robust regulatory framework for artificial intelligence (AI) to support its innovation efforts. China is a leader among emerging economies in AI preparedness, and the issuance of draft guidelines for the AI industry by the industry ministry demonstrates the country’s commitment to setting standards in this area by 2026. Implementing clear regulations will foster innovation and ensure responsible AI development.
While China has made strides in renewable energy deployment, there is room for improvement in decarbonization efforts. Georgieva urged China to sell a greater share of electricity at market prices to enhance efficiency in decarbonization. She also recommended expanding the emissions trading system (ETS) to include the industrial sector, beyond its current coverage of the power sector. By leveraging its potential in the green economy, China can further reduce its carbon footprint and drive sustainable economic growth.
The IMF’s insights highlight key areas where China can focus its efforts to achieve accelerated economic growth. By implementing pro-market reforms, addressing property sector challenges, promoting domestic consumption, enhancing AI regulation, and advancing the green economy, China can pave the way for a thriving and sustainable future.
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