In maintaining its assumption that China's gross domestic product will grow by 4.6% in 2024 - below Beijing's 5% target - the IMF on Tuesday (April 16) pointed to persistent concerns about a prolonged slump in the property market.
Meanwhile, the Washington-based fund's estimate for the US economy this year has been revised up to 2.7% - up 0.6 percentage points from its January forecast. And India's GDP growth forecast has also been raised to 6.8%, up 0.3 percentage points.
Residential buildings developed by China Evergrande Group in Hebei province remain unfinished as the property crisis shakes the market. Photo: Reuters.
“Without a comprehensive response to the troubled real estate sector, China’s growth could slow, hurting its trading partners,” the IMF said in its flagship publication, “ World Economic Outlook.”
“Beijing’s property sector continues to be plagued by multiple woes: investment inflows, expectations of future home prices, and falling housing demand, while household confidence and spending continue to weaken, weighing on global growth,” the report explains.
The warning comes at a time when the property market, which the IMF says once accounted for up to 20% of the country's economic activity, continues to hamper the recovery.
Although the country's GDP growth beat market expectations by rising 5.3% in the first quarter, real estate investment still fell 9.5% in the first quarter - larger than the 9% decline in the first two months of the year, according to data released by the State Administration of China.
Floor space sold in the first quarter fell 19.4% from a year earlier, while new property construction starts fell 27.8% from the same period last year.
China’s housing market woes began in 2020 amid the unprecedented Covid-19 pandemic and as regulators tightened financial policy, leading to multibillion-dollar defaults by real estate companies, most notably Evergrande and Country Garden.
“Policy responses by authorities could significantly reduce the economic costs of such developments if they include accelerating the exit of unviable property developers, accelerating the completion of housing projects, and addressing local government debt risks,” the IMF report said.
“Additional monetary policy easing, particularly through low interest rates, as well as expansionary fiscal measures – including financing for unfinished housing and support for vulnerable households – could further support demand and avoid deflationary risks,” the report added.
A row of residential buildings in Changzhou, China - Photo: CNN.
China's property crisis remains a major challenge this year as other economic indicators improve, said Harry Murphy Cruise, an economist at Moody's Analytics.
Trade, industrial production and fixed asset investment all grew in the first months of the year, which means “the woes of the property market are front and center,” he noted.
China's economic stimulus announced last month was "uninspiring" and consumers were "closing their wallets," Murphy Cruise said.
Beijing has accelerated the construction of affordable housing, urban villages and emergency facilities to offset the decline in investment by private developers.
In addition, they expanded financial support to developers earlier this year by establishing a whitelist mechanism in which banks receive recommendations from city governments on projects deemed financially stable and suitable for additional lending support.
The IMF also warned that trade links between China and the US are “weakening”, with China’s share of US imports falling by nearly 8 percentage points between 2017 and 2023.
The US may be sourcing more goods from Vietnam and Mexico, they added, and this fragmentation could lead to “potential efficiency losses” along the global supply chain.
The IMF predicts China's economic outlook to remain at 4.1% in 2025.
Diep Nguyen (According to SCMP)
Source: https://www.congluan.vn/du-bao-tang-truong-gdp-trung-quoc-chua-an-tuong-vi-linh-vuc-bat-dong-san-van-gap-kho-post292110.html
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