China’s Economy to Grow by 5% This Year, But With a Warning

The Chinese Economy: A Strong Start in 2024

China is experiencing a boost, with the IMF revising its growth forecasts for 2024.
The dragon’s economy is set to increase by 5% this year, following a strong first quarter, as declared by the International Monetary Fund on Wednesday.
This marks an improvement from the previous forecast of 4.6% expansion, although slower growth is expected in the coming years.

International Trade and Real Estate Crisis

China is globally recognized for its significance in international trade, especially amid high tensions with the US and Europe.
The focus is also on the real estate crisis, once crucial for China’s growth but now relegated to a secondary sector in need of restructuring.
Heavy losses in this sector could have global financial repercussions.

Recent Developments and Forecasts

The Chinese economy grew by 5.3% in the first quarter, outperforming expectations, driven by robust exports.
April data indicated weak consumer spending, while industrial activity saw a resurgence.

Recent radical measures announced by Chinese authorities to support the struggling real estate sector, including removing the minimum threshold on mortgage rates, have prompted the IMF to revise its forecasts for 2024, with a cautious outlook for the following years.

IMF’s Recommendations and Future Outlook

According to the IMF, China is projected to grow by 5% in 2024 and slow down to 4.5% in 2025.
IMF’s First Deputy Managing Director, Gita Gopinath, highlighted the need for additional policy actions to address unresolved issues in China’s internal economic dynamics.

The IMF suggested that greater price flexibility, along with monitoring and mitigating potential macrofinancial risks, could further stimulate real estate demand and help restore balance in the sector.

Challenges Ahead

China still faces challenges in resolving longstanding economic issues while navigating escalating conflicts with the US and Europe over key sectors such as semiconductors, electric vehicles, and Artificial Intelligence.
The IMF has cautioned China about future developments.

With an expected growth slowdown to 3.3% by 2029 due to population aging and declining productivity, addressing demographic shifts and productivity challenges will be crucial not only for China but also for other major global powers.