The International Monetary Fund (IMF) might have to cut back on its forecast for China’s economic growth because of COVID lockdowns and real-estate issues.
- The IMF expects Chinese gross domestic product (GDP) to expand 3.2% this year and 4.4% in 2023.
- Property developers have defaulted on a record-number $37 billion in bonds.
- “There is indeed the possibility that in this time of very high uncertainty, we might have to revise these projections down,” says IMF Managing Director Kristalina Georgieva.
Why it’s news
China is dealing with widespread uncertainty as the country is being faced with COVID restrictions and difficulties within the property sector.
China has instilled a Zero-COVID policy to attempt to eradicate the sickness. The policy includes mass testing, lockdowns, and other strict protocols. Anyone who tests positive for COVID is put into quarantine isolation for an extended period of time in an attempt to stop the spread of the sickness.
The intense policy and lockdowns have caused frustration resulting in protests across the country.
Not only is China dealing with mass COVID cases and protests, but the country is also suffering from property difficulties.
Property developers have defaulted on a record amount of dollar bonds this year, but the banks are offering at least 270 billion yuan ($37 billion) in new credit to developers, according to Bloomberg writer Kamil Kowalcze.
The credit being given to developers is the country’s attempt to ease the problems within the real estate market.
“China does have fiscal space to boost its economy and counter any pressure for the growth to go down,” says IMF’s Georgieva. “We have been supportive in looking into what China can do. A policy more effective for China itself and for its role in the world economy.”
These difficulties within the country are causing widespread concern which is making the IMF consider knocking down the country’s expected growth.