GDP rebound positions nation for key roles spanning health to debt relief
Shanghai's city view. (PHOTO / IC)
With its rapid return to growth, China could hasten the world's economic recovery by expanding access to a coronavirus vaccine, providing debt relief and sustaining global infrastructure investment, the International Monetary Fund said on Wednesday.
Confirming that the GDP of the world's second-largest economy is projected to grow 1.9 percent in 2020 and 8.2 percent in 2021, the IMF, as it also forecast early last month, highlighted the role of China in helping overcome "several of the major challenges" facing the global economy, which it forecast to contract 4.4 percent this year.
"This includes supporting international efforts to expand access to a vaccine, providing debt relief to low-income countries and sustainable financing for global infrastructure investment, and tackling climate change," the fund said at the conclusion of its so-called Article IV Mission consultation with China.
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Early last month, China officially joined the COVAX, an international initiative aimed at ensuring equitable global access to COVID-19 vaccines, becoming the largest economy to support the initiative so far, according to earlier media reports.
The IMF conducts Article IV Mission consultations with its members annually. An IMF team of economists visits a country and discusses with government and central bank officials how to assess a member's economic health and to forestall future financial problems.
This year's tour was done virtually due to the COVID-19 pandemic, which has prompted new lockdowns in many parts of the world and has resulted in the worst global downturn in decades.
"The COVID-19 pandemic has inflicted significant human and economic costs on China, but a major containment effort has helped contain the spread of the virus, and macroeconomic and financial policies have mitigated the crisis' impact and quickly returned the economy to growth," IMF First Deputy Managing Director Geoffrey Okamoto said.
China's GDP grew by 4.9 percent year-on-year in the third quarter, faster than the 3.2 percent expansion between April and June. This suggested "a rapid return to the pre-COVID trend", according to US economist Stephen Roach, a former chairman of Morgan Stanley Asia.
Unbalanced development
During the Article IV Mission, Okamoto held virtual meetings with People's Bank of China Governor Yi Gang and other officials to discuss the country's policy mix to secure balanced growth against the headwinds from the pandemic.
"While the recovery is advancing, growth remains unbalanced as it relies heavily on public support while private consumption is lagging," said Okamoto, cautioning that China's outlook faces downside risks, stemming from rising financial vulnerabilities and the increasingly challenging external environment.
To secure a balanced recovery, macroeconomic policies need to remain supportive and their effectiveness enhanced, with fiscal policy staying slightly expansionary and shifting from spending on infrastructure toward strengthening social safety nets and promoting green investment, the IMF said in its release.
It also said China and its trading partners should work together to build a more open, stable and transparent rules-based international trade and investment system.
The 189-member lender's latest assessment seems to match the development trends in China, which has pledged to further open up and ramp up support for economic globalization.
Chinese President Xi Jinping, in a video speech at the China International Import Expo in Shanghai on Wednesday, called on all countries to safeguard the multilateral trading system, improve the rules of global economic governance, and build an open world economy.
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"Our aim is to turn the Chinese market into a market for the world, a market shared by all, and a market accessible to all," Xi said. "This way, we will be able to bring more positive energy to the global community."
Nicholas R. Lardy, a senior fellow at the Washington-based Peterson Institute for International Economics and an expert on the Chinese economy, said China has substantially liberalized access by foreign firms to its immense domestic financial market and is now an increasingly important destination for foreign portfolio investment.
IMF Managing Director Kristalina Georgieva said in mid-October that China's growth momentum is important "for countries that are connected to the Chinese economy through global value chains", where demand from China is an engine for growth.
Chinese imports rose 4.3 percent year-on-year in the third quarter of 2020, according to the customs statistics.
