The International Monetary Fund (IMF) has asked China to increase Covid-19 vaccinations while emphasising the need to rebalance the virus response strategy in order to address challenges arising from the property sector and slowing global demand.
This recommendation was made following an annual review of China’s economic policies, which included virtual discussions between the IMF and several senior policy officials about reform progress and challenges, as well as policy responses.
The IMF noted that China had weathered the initial effects of the pandemic. However, China’s growth has since slowed and remains under pressure due to recurring Covid outbreaks, significant challenges in the real estate sector and slowing global demand.
“Under the zero-Covid strategy, China weathered the initial pandemic impact well, allowing the economy to quickly recover from the early-2020 lockdowns and significantly expand the global supply of medical goods and durable goods at a critical time for the global economy. However, China’s growth has since slowed and remains under pressure due to recurring Covid outbreaks, significant challenges in the real estate sector and slowing global demand,” Gita Gopinath, the IMF’s First Deputy Managing Director said.
“Although the zero-Covid strategy has become more agile over time, the combination of more contagious Covid variants and persistent gaps in vaccinations have resulted in the need for more frequent lockdowns, weighing on consumption and private investment, including in housing,” Gopinath said.
According to the IMF, while intended to rein in high leverage, regulatory tightening in the property sector has added to severe financial strains for developers, resulting in a rapid slowdown in housing sales and investment, as well as a sharp decline in local government land sale revenues.
This minor rebuke of China’s Covid policy comes as the country’s growth is projected to be 3.2 per cent in 2022, rising to 4.4 per cent in 2023 and 2024 if the current zero-Covid strategy is gradually and safely lifted in the second half of 2023.
The risks remain on the downside, with the economy facing external headwinds from a global slowdown, higher energy prices and tighter global financial conditions. Domestically, recurring Covid outbreaks and lockdowns, as well as ongoing property sector challenges, remain major risks, according to her.
“In the future, a further recalibration of the Covid strategy should be well prepared, including increasing the rate of vaccinations and maintaining it at a high level to ensure that protection is maintained,” she added.
Doonited Affiliated: Syndicate News Hunt