IMF Overestimates China's Economic Growth Rate... Difficult to Exceed 3%

The International Monetary Fund's (IMF) forecast for China's economic growth rate has been overestimated, and it is analyzed that achieving a growth rate above 3% in the mid-to-long term will be difficult. The data provided by China to the IMF may be inaccurate and inflated, suggesting that the actual growth rate could be only half of the predicted figure.

On the 5th, the Hong Kong South China Morning Post (SCMP) reported that Daniel Rosen, founder of the US-China relations consulting firm Rhodium Group, made this claim. Rosen said, "The bottom of China's real estate cycle is approaching, and the central government must rescue struggling local governments," adding, "The increasing export constraints imply that this year's economic growth rate could be as low as around 2%."

Earlier, the IMF announced its forecast for China's economic growth rate this year at 5.2%. However, Rosen argued, "It does not seem likely that China's growth rate will exceed 3% in the mid-to-long term." Regarding the background, he explained, "The IMF has to use data provided by China and cannot choose or utilize alternative data on its own," adding, "They are somewhat constrained."

In a report released the previous day, Rhodium Group diagnosed China's economic crisis and instability as "not cyclical factors like COVID-19, but due to the failure of national economic system reforms." They forecast this year's economic growth rate to be below 4%. Furthermore, considering the lack of major reform announcements so far, they expect a similar weakness in 2024, stating, "If China announces specific reforms, growth could slow further during the adjustment process next year." They also predicted, "The slowdown in China's economic growth may mean that surpassing the United States, the world's largest economy, will not happen for at least ten years, or even within this century."

They argued that for China to move toward economic optimism, it must allow 'active discussions' on structural slowdown and reforms. The report emphasized, "It is a positive sign that Chinese economists are discussing progress on macroeconomic reforms, but there is still a long way to go between academic discussions among economists and officials and actual reforms by China's top leadership."

Additionally, the report suggested that China should stop publicly announcing symbolic and absurd levels of gross domestic product (GDP) growth targets and instead disclose employment and inflation targets. The report stressed, "This could be one of the best things the Chinese government can do to improve the quality of growth and policy decisions."

Nargiza Salidjanova, director of the China project team at Rhodium Group, pointed out that China's regulatory policies, especially regulations in the technology sector, are causing weakened consumer demand and reduced capital inflows. According to China's Ministry of Commerce, foreign direct investment in China from January to July fell 9.8% year-on-year to $111.8 billion in US dollar terms.

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