The International Monetary Fund (IMF) has expressed concerns about a potential deterioration in China’s property market while revising its growth forecasts for the world’s second-largest economy. The IMF adjusted its growth projection for China for this year to 4.8%, down by 0.2 percentage points from its previous estimate in July. The forecast for 2025 anticipates growth at 4.5%.
The IMF, headquartered in Washington, D.C., also pointed out that the contraction of China’s property sector beyond expectations poses one of several risks to the global economic outlook. The organization warned that conditions in the real estate market could deteriorate further, leading to price corrections amid declining sales and investments.
The IMF’s World Economic Outlook highlighted that historical property crises in countries like Japan in the 1990s and the U.S. in 2008 suggest that without addressing the crisis in China, prices may continue to decline. This could negatively impact consumer confidence, leading to reduced household consumption and domestic demand.
China has introduced various measures in recent months to bolster its slowing economic growth. In September, the People’s Bank of China announced support measures such as reducing banks’ required cash reserves. Additionally, China’s top leaders emphasized the need to halt the property sector’s decline and promote recovery. Major cities like Guangzhou and Shanghai unveiled initiatives to boost homebuyer sentiment.
The Chinese Minister of Finance hinted at the possibility of increasing debt and the deficit to stimulate the economy. The housing ministry in China expanded its “whitelist” of real estate projects and accelerated bank lending for unfinished developments.
Some of these measures have been factored into the IMF’s latest projections, according to Pierre-Olivier Gourinchas, the IMF’s chief economist. He mentioned that while the recent support measures are positive, they have not yet influenced the IMF’s growth projections for this year and the next.
The IMF also highlighted potential risks associated with economic measures, cautioning that government stimulus to address weak domestic demand could strain public finances. Subsidies targeted at boosting exports might escalate trade tensions with China’s trading partners.
