The IMF urged China to resolve its real estate crisis as soon as possible

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China’s real estate crisis must be resolved promptly, emphasizes IMF official
By [Your Name], Staff Reporter

China is facing a pressing need to address its real estate crisis, according to Vitor Gaspar, head of fiscal affairs at the International Monetary Fund (IMF). Gaspar stated on Wednesday that China’s debt is increasing at a rate of about two percentage points of gross domestic product (GDP) each year. Despite this concerning trend, Gaspar believes that Chinese authorities have the necessary policy space and options to manage deficits and debt effectively.

The IMF’s latest Fiscal Monitor report highlights the significant negative impact of the current slowdown in China’s real estate sector on economic growth. This slowdown is affecting financial markets, consumer confidence, and putting strain on local government finances. IMF Managing Director Kristalina Georgieva has recommended that China shifts its focus towards services to address excess capacity in certain sectors and unlock significant economic benefits.

According to the Fiscal Monitor, China’s public debt is projected to surpass 100% of GDP in 2027 and exceed 110% by 2029. The widening gap between income and expenses, along with increased spending on pensions and interest, will contribute to this trend. The IMF warns that persistently high primary deficits may continue to drive up public debt in China, leading to slower economic growth in the medium term.

The IMF also cautions that China’s lower growth could have global macroeconomic and trade implications, particularly for Beijing’s main trading partners. The United States, for example, is forecasted to see its debt reach 123.3% of GDP this year, rising to 133.9% by 2029. The report suggests that without policy changes, public debt could double by 2053 for both the US and China.

The IMF’s warnings underscore the urgent need for China to address its real estate crisis and implement necessary reforms to ensure sustainable economic growth in the coming years.

(With information from EFE, EuropaPress, and Reuters)