At the ongoing World Bank-IMF annual meetings in Morocco, IMF officials urged Chinese authorities to intervene as an unprecedented property crisis rocks the world's second-largest economy.
ADVERTISEMENTThe International Monetary Fund (IMF) is apprehensive about China’s current financial standing and calls on national authorities to “restore confidence in the real estate sector", IMF officials said on Tuesday.
"We are particularly concerned about financial stability in China," said Tobias Adrian, the institution’s financial counsellor, on the second day of the World Bank-IMF annual meetings in Morocco, which end on Sunday.
The IMF downgraded its growth forecast for the Asian country in its latest outlook. The world's second-largest economy is now expected to see its GDP grow by 5% this year, rather than the 5,2% the fund had predicted in July.
The IMF’s expectations have dropped due to an unprecedented liquidity crisis in real estate, at a time when Evergrande, the world’s most heavily indebted property developer, is on the verge of bankruptcy and the giant Country Garden nears default.
"As the real estate market has come under pressure in recent years, authorities have taken steps to stabilise the real estate market", but "local governments are exposed through their investment vehicles, as are provincial banks", detailed Adrian.
Fabio Natalucci, deputy director of the IMF’s Monetary Markets department, said it is “really crucial” for China to restore confidence in the property sector, noting that it represents a significant part of the country’s GDP.
In fact, it accounts for around a quarter of the Chinese economy.
The institution’s chief economist, Pierre-Olivier Gourinchas, also called for "energetic action" from the national authorities, “for example by restructuring promoters in difficulty to ensure that financial instability does not increase and does not extend to the financial system as a whole.”
