IMF Asia-Pacific Director: "China Must Reform State-Owned Enterprises to Boost Productivity"

The International Monetary Fund (IMF) advised that reforming state-owned enterprises is necessary to boost China's slowing economic growth rate.

On the 10th, Chinese economic media Caixin reported that Krishna Srinivasan, Director of the IMF Asia-Pacific Department, who recently visited China, made this statement. In an interview with Caixin, Director Srinivasan said, "China's economic growth rate will fall to 3.4% in five years," diagnosing that "this is due to factors such as a slowdown in productivity improvement and population aging."

[Image source=Yonhap News]

He said, "To maintain a medium-term growth rate around 4.5%, the productivity gap between state-owned enterprises and private enterprises must be reduced," and "I recommend prioritizing efforts to improve productivity through reforms of state-owned enterprises." He added, "To address population aging, I suggest extending retirement age and strengthening vocational training and retraining."

He also viewed that the future spread of global economic fragmentation will negatively affect China's economic growth potential. Director Srinivasan explained, "The difficulties in China's investment environment over the past two years were mainly caused by the pandemic, but even now, after the pandemic's impact has passed, China still faces challenges due to economic fragmentation."

Recently, the IMF estimated that the US-China tariff war and other hegemonic conflicts likely reduced last year's global gross domestic product (GDP) by 0.4 percentage points. It also predicted that the negative impact of regional economic fragmentation on global GDP could range between 0.2 and 7 percentage points. Director Srinivasan emphasized, "Risks between China and the United States are materializing in some areas, and efforts must be made to prevent them from emerging in others."

Caixin also reported in the related interview article that the IMF lowered South Korea's economic growth forecast for this year by 0.5 percentage points from 1.5%. The reason given was that "the global technology cycle, represented by semiconductors, has not yet fully bottomed out."

This content was produced with the assistance of AI translation services.