The International Monetary Fund, in its latest World Economic Outlook, said that China—with effective epidemic containment measures, a forceful public investment response, and central bank liquidity support have facilitated a strong recovery.
Helger Berger, the IMF’s China mission chief and Assistant Director in the IMF’s Asia and Pacific Department, said in a written interview with People’s Daily that China’s economic recovery is progressing well and there needs to be more focus on rebalancing in the future. He appreciated a series of measures taken by China to safeguard multilateralism.
In terms of growth this year, China’s recovery is well on its way, but still lacks balance. The recovery has been helped by a strong containment effort and swift policy actions early on to mitigate the crisis and support the recovery, including ramping up public investment. However, the recovery of private consumption has been lagging, Berger said.
The IMF expects China’s economy to gain momentum this year as labor market conditions continue to improve and incomes and consumption gather strength. To consolidate growth, China should avoid premature withdrawal of fiscal support, and should phase out special financial support and strengthen regulation once growth is on a firm footing, Berger suggested.
China’s overall growth performance over the last 40 years has been truly remarkable, said Berger. He spoke highly of the significant progress China has made in financial opening-up. He said that China has made significant progress in the opening up of the financial sector, where reforms have continued despite the crisis, with the government adopting a new foreign investment law and streamlining the negative list for foreign investment, for example. He expressed optimism that China would continue to make progress in this area in the future.“As China continues its reform agenda to rebalance the economy, implementing structural reforms to further open up its markets and increase competition will strengthen the resilience of China’s domestic economy and keep it attractive for foreign investment.”
“China has also been an important contributor to the recovery in global trade. Higher growth in China has also brought higher imports as firms are importing raw material and other inputs and consumers order goods from abroad. This has bolstered demand in China’s trading partners and beyond”, Berger said. On China’s growth prospects, Berger said reforms could be implemented in key areas to improve productivity and ensure high-quality growth.
Berger said the impact of the outbreak is global and called on all countries to work together to uphold multilateralism. “On the vaccine front, it is good to see that China is contributing to the very important task of making affordable and effective vaccines available to low-income countries, including through the Covax initiative”, he said.
On the urgent need to counter the climate crisis, He also said the IMF welcomed China’s recent announcement that China will strive for CO2 emissions to peak before 2030 and achieve carbon neutrality by 2060. “This is an urgent task that the world can only shoulder together”.
As for China’s ongoing digital RMB (or eCNY) efforts, Berger said the IMF is closely following the rollout, adding that the progress China has made is exciting and that “it will be important to learn from the pilots that are underway.”
He believes that the PBOC’s digital currency has the potential to promote financial inclusion and improve payment efficiency, expand the coverage of payment services to unbanked households and lower transaction costs for households and small firms. The eCNY could also help the targeted delivery of fiscal support and improve transparency in public finances.
He suggested that it is necessary to closely monitor and assess the risks associated with digital currencies.