IMF: China’s government should spend more to support economy

In order to counter the impact of coronavirus lockdowns and a property sector downturn on the economy, China’s government should ramp up fiscal spending, the International Monetary Fund (MF) said in its annual report on the country’s economy. 

Key takeaways

The economic recovery “lacks balance and momentum has slowed, reflecting the rapid withdrawal of fiscal support, lagging consumption amid recurrent COVID-19 outbreaks despite a successful vaccination campaign, and slowing real-estate investment.”

“The combination of more frequent outbreaks and a zero-Covid tolerance approach has forced China’s economic activity into a stop-and-go pattern” and this could “further delay the recovery in private demand.”

“The IMF has no reason to expect that coronavirus outbreaks will become any less frequent this year.”

“This is one of the big reasons we have lowered our forecast for the year.” 

“The government should prioritize spending on “targeted direct income support” instead of infrastructure investment.”