IMF urges China to reaccelerate reforms to counter demographic crisis, slowing productivity

The International Monetary Fund says China’s economic prospects are clouded by structural issues, such as a shrinking workforce and weak productivity growth

China must make reforms to keep state firms competitive, continue opening up and gradually lift the retirement age, the organisation says in a new report

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The IMF has upgraded its forecast for China’s 2023 gross domestic product growth to 5.2 per cent, but warned structural issues could hamper it in the medium term. Photo: Getty Images

Published: 5:00pm, 3 Feb 2023

China should reaccelerate reforms such as tackling the country’s shrinking labour force and weak productivity growth to maximise its economic potential following three years of coronavirus disruptions, the International Monetary Fund (IMF) said on Friday.

Implementing such reforms would enable China’s income level to rise by around 2.5 per cent in five years, according to the IMF’s Article Four staff report.

“Without reforms, we currently estimate growth to fall below 4 per cent over the next five years,” Diego A. Cerdeiro, a senior economist with the IMF’s Asia and Pacific Department and Sonali Jain-Chandra, the IMF mission chief for China, said in the report.

The IMF on Tuesday upgraded its forecast for China’s 2023 gross domestic product (GDP) growth to 5.2 per cent – owing to the nation’s full reopening – from the previous 4.4 per cent projection made in October.

Key structural reforms should be reaccelerated to lift potential growth

Thomas Helbling

But the country’s medium-term growth prospects are clouded by structural issues, according to the IMF report, which was written following the organisation’s annual health check of the Chinese economy and financial system in November.

China’s weak productivity growth is largely a result of inefficient state-owned enterprises (SOEs) and declining business dynamism in the country, the IMF said.