GLOBAL: IMF Sees China Growth Moderating Towards 3%

The IMF’s outlook for China’s economy is pessimistic with the growth continuing to slow over the forecast horizon, which is likely to reduce its role as an engine of global growth and increase calls for protectionist measures against the country. Also, the IMF’s chief economist Gourinchas said that the latest China fiscal stimulus had not been included in the updated forecasts due to a lack of detail. 

• Growth in emerging Asia is forecast to slow to 5.3% in 2024 from 5.7% and then to 5% down 0.1pp compared with July and up 0.1pp vs April. The downtrend continues over the IMF’s forecast horizon driven by China. China’s growth is expected to reach 3.3% in 2029 compared with 4.8% this year and 4.5% in 2025 and the 6% average since 1980.
• The IMF’s Gourinchas said that PBoC rate cuts are unlikely to materially impact China’s growth, while US Treasury Secretary Yellen said that it needs to boost consumption as a share of GDP and sort the property sector problems, neither of which recent measures address sufficiently.
• They noted that excess capacity remains a problem and Yellen said that Chinese subsidies are “utterly enormous” according to Reuters. Trade with China has been a major US election issue and while the bilateral deficit improved from Q4 2022, that trend has stalled again over this year.
• The IMF notes a larger correction in China’s property market, especially if it impacts consumption, as a risk to global growth. An increase in protectionism is also a key risk, the degree to which will be dependent on the US election outcome and continued Chinese subsidies, which have triggered recent EV tariffs in a number of countries.

US trade deficit US$bn 12mth sum