China's economic journey over the past quarter-century has been nothing short of extraordinary. With an average annual GDP growth exceeding 8%, the nation has lifted millions out of poverty and established itself as the world's second-largest economy, leading when measured by purchasing power parity.
The impact of China's development extends far beyond its borders. In 2023, the country contributed approximately one-third of global economic growth, underscoring its pivotal role in the world economy, especially as the world continues to rebound from the pandemic's challenges.
The International Monetary Fund (IMF) emphasizes that maintaining strong and sustainable growth in China is not only beneficial for the nation but also vital for the global economy. According to the IMF's 2023 annual report on China, the key focus should be on ensuring a robust economic recovery and navigating the significant adjustments in the real estate sector.
In the short term, China has made a commendable recovery, with GDP growth rising to 5.2% in 2023 from 3.0% in 2022, aligning with government targets. However, the real estate sector poses a unique challenge. This sector, which accounts for about a fifth of total value added, has been a major source of local government revenue but has also faced issues like affordability and overinvestment.
The IMF projects that underlying demand in China's real estate market may decline by 35-55% over the next decade compared to the last ten years. To address this, the authorities have implemented measures such as boosting lending for unfinished housing projects, expanding benefits for first-time homebuyers, lowering down payments, and enabling mortgage refinancing.
However, more comprehensive policy actions are needed to facilitate a smooth transition. The IMF recommends supporting viable property developers, reforming the presale model, ensuring market prices adjust appropriately, and expanding access to housing through public and rental initiatives. Success in these areas is crucial for achieving a balanced and sustainable real estate market, which in turn supports China's overall economic stability and growth.
Reference(s):
Securing China's sustainable growth a win for China and the world
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