IMF: China on 'well advanced' recovery track

China's economic recovery from the COVID-19 pandemic is "well advanced" though momentum is slowing, and its climate strategy is being implemented by all levels of government, the International Monetary Fund said on Friday, days after it concluded its annual consultation mission to the country.

An IMF team, led by Helge Berger, mission chief for China and assistant director of the Asia and Pacific Department, conducted discussions virtually with senior Chinese government and banking officials as well as private business executives in a 13-day Article IV Mission consultation that ended on Nov 10.

The consultation is so called because it is based on Article IV of the IMF's Articles of Agreement. It usually involves bilateral discussions between the IMF and a member to assess a member's economic health and to forestall financial risks.

"After strong containment efforts last year to keep the outbreak under control, a successful vaccination campaign has inoculated the vast majority of Chinese citizens," Geoffrey Okamoto, IMF's first deputy managing director said on Friday.

However, he cautioned that as elsewhere, the more contagious variants are posing challenges.

China's recovery is well advanced, but momentum is slowing down partly due to withdrawal of policy support and the lagging recovery of consumption amid recurrent COVID-19 outbreaks, according to a release from the IMF.

The IMF has predicted China's economy to grow at 8 percent this year, and at 5.6 percent for 2022, and the pandemic and consumption again could pose short-term risks to the forecast, the 190-member global lender said in the release.

On Tuesday, Chinese Premier Li Keqiang noted that China's economy has, in general, sustained the momentum of steady recovery this year while facing new downward pressures, but the fundamentals of China's long-term economic development remain unchanged.

The premier also said China would introduce a mix of tax and fee reductions at an appropriate time to keep its economic operations within a "reasonable range".

Okamoto noted that securing "high-quality" growth - growth that is balanced, inclusive and green - will require supportive macroeconomic policies, including fiscal policy, which should temporarily shift to focusing on strengthening social protection and green investment over traditional infrastructure spending.

"China also plays an important role in the global fight against climate change. Implementation of China's 2030 carbon peaking and 2060 carbon neutrality goals has begun in all key ministries as well as local and central governments," he said.

That approach will be most successful if based on an early start and a comprehensive strategy that combines economic rebalancing toward a more consumption-based growth model, with the use of carbon-pricing tools to help achieve the climate goal while supporting high-quality growth, he added.

The IMF official also said China plays a key role in the multilateral effort to address global challenges.

For example, he said China can help end the pandemic and secure an inclusive and green recovery by continuing its COVID-19 vaccine distribution, greening the Belt and Road Initiative, aiding the efforts to put the debt of low-income countries on a sustainable footing, and contributing to building a more open, stable and rules-based international trade system.

Krishna Srinivasan, deputy director of the IMF's Asia and Pacific Department, who has overseen the Article IV consultation mission, said China's effort in pursuing key structural reforms, such as further opening up of domestic markets, reforming State-owned enterprises and ensuring competitive neutrality with private firms will support its transition to high-quality growth.

"Equally important, China's continuing reforms toward high-quality, sustainable and balanced growth can contribute to lowering carbon emissions," Srinivasan told China Daily.

Commenting on the virtual summit between Chinese President Xi Jinping and US President Joe Biden on Tuesday, Srinivasan said, "Working together, the US and China have the opportunity to help address the most pressing global challenges - from the pandemic to global trade and the fight against climate change."

The US and China account for a large share of the global economy - about 42 percent in market exchange-rate terms, and with size come both challenges and opportunities.

A further escalation of the bilateral tensions of the last few years would come at a high cost - not just for China and the US, but for the whole world, he noted.

"A very clear example is trade. Fund staff has estimated that the direct cost of tariffs raised since 2017 will have lowered global GDP by about 0.4 percent this year, with negative spillovers to other countries adding to the direct costs for the US and China," he wrote in an email.

Even larger losses could come from technological decoupling - in some scenarios on the order of 5 percent for many economies, with substantial damage to global technology leaders, including China and the US, he added.