IMF chief calls on China to rebalance its economy towards consumption

The head of the International Monetary Fund (IMF), Kristalina Georgieva, praised on Sunday the strong contribution that China will make to global growth in 2023, however urging Beijing to rebalance its economy towards consumption.

The IMF forecasts a 5.2% increase in the Asian giant’s GDP this year, a performance made possible by the gradual normalization of activity after the lifting of anti-Covid restrictions in the country in December.

“This strong rebound means that China should account for around a third of global growth in 2023, which will provide a welcome boost to the global economy,” said Kristalina Georgieva.

She was speaking at a forum in Beijing.

Kristalina Georgieva, however, called on China “to increase productivity and rebalance the economy by moving away from investment in favor of more consumption-driven growth”.

According to her, this method is more sustainable, less dependent on debt and will help to meet climate challenges.

“To achieve this, the social protection system should play a central role by increasing health insurance and unemployment insurance benefits in order to cushion the shocks suffered by households,” she pleaded.

Social protection in China has been on the rise for several decades, as the country has grown richer, but is not at the level of the most advanced economies.

Kristalina Georgieva also called for “reforms” to “level the playing field between the private sector and public companies”, the latter being traditionally favored by the state.

According to her, these rebalancing measures could lead to a reduction in carbon dioxide emissions of around 15% in three decades.

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“That would translate into benefits for the whole world: a drop in global emissions of 4.5% over the same period,” she said.

Like other countries, China is vulnerable to extreme weather events, which are becoming more frequent with climate change.

The Asian giant was hit last year by a severe drought that reduced hydroelectric power production and led to power cuts.

“Most of the country’s carbon dioxide emissions are generated by the energy and industry sectors,” said Kristalina Georgieva.

“Shifting to consumption-led growth will therefore reduce energy demand and ease energy security pressures.”

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