China's economic growth at risk, IMF chief calls for urgent reforms

Kristalina Georgieva, Head of the International Monetary Fund.

International Monetary Fund (IMF) managing director Kristalina Georgieva has warned that China needs structural reforms to avoid “a fairly significant decline in growth rates”.

In a conversation with CNBC at the World Economic Forum (WEF) in Davos, Georgieva said China was facing both short and long-term challenges.

In the short term, China’s property sector needed “fixing” along with a high level of local government debt, the IMF chief said while counting demographic changes and a “loss of confidence” as the long term challenges confronting the world's second biggest economy.

“Ultimately, what China needs are structural reforms to continue to open up the economy, to balance the growth model more towards domestic consumption, meaning create more confidence in people, so [they] don’t save, they spend more,” Georgieva said.

“All of this would help China to deal with what we are predicting in the absence of reforms would be a fairly significant decline in growth rates going under 4 percent."

Also Read: Davos 2024: Moving towards G0 and T3 world order, says BCG's Neeraj Aggarwal

China’s economy saw sluggish growth in 2023, hampered by real estate issues and a slump in exports. Investors expect the economy to have grown by around 5 percent last year.

The IMF in November raised its China growth forecast to 5.4 percent for 2023 after some policy moves by Beijing. However, the Washington, DC-based institution said it expected growth to slow to 4.6 percent in 2024, warning of continued real estate struggles.

Also Read: Davos 2024: India's massive digital infra will help it take AI leap, says PwC chief Bob Moritz

Georgieva is one of several top economic figures in attendance at this year’s WEF meeting, which end January 19 . “Rebuilding Trust” is the theme of the the summit, with geopolitical tensions, global fragmentation as well as inflation and economic growth on the agenda.

(with agency inputs)