Lujiazui area in Shanghai Photo:Xinhua

The IMF raised its forecast of China's GDP growth this year to 5.4 percent from 5 percent in October thanks to a better-than-expected third-quarter consumption performance and recently announced government policy supports, the IMF said on Tuesday at the conclusion of the annual assessment of the Chinese economy.

According to the IMF, the Chinese economy is on track to meet the government's 2023 growth target that is around 5 percent. Real GDP is projected to grow by 5.4 percent in 2023 and 4.6 percent in 2024. 

The projection reflects an upward revision of 0.4 percentage points in 2023 relative to its projection in the World Economic Outlook in October, due to a stronger-than-expected outturn in the third quarter this year and recent policy announcements.

"Supportive macroeconomic policies are needed to bolster activity amid the needed property sector adjustment and structural reforms to address local government debt. A reorientation of fiscal expenditures toward households and additional easing via interest rates would support growth and investment. Greater exchange rate flexibility would help absorb external shocks and strengthen monetary policy transmission," it said.

Broad-based and pro-market structural reforms aimed at boosting productivity, supporting rebalancing and decarbonization will help support new engines of growth and foster a more balanced, inclusive and green growth, IMF said.

An IMF team, led by Sonali Jain-Chandra, Mission Chief for China, visited China from October 26 to November 7 to conduct discussions on the annual assessment of the Chinese economy, also known as the 2023 Article IV Consultation. The team held discussions with senior officials from the government, the People's Bank of China, private sector representatives, and academics to exchange views on economic prospects and risks, challenges and policy responses.

"We welcome China's fiscal measure that was recently announced, an additional 1 trillion yuan ($137 billion) [in treasury bonds during the fourth quarter]. I think that is helpful for building climate resilience and also is going to help the recovery. It is also one of the reasons why we have upgraded our growth forecast for this year and for next," Gita Gopinath, First Deputy Managing Director of the IMF, said on Tuesday.

"For this year as a whole, we have just upgraded [China's economic] growth to 5.4 percent. After a sharp rebound in the first quarter, we saw some payback in the second quarter and we see the second half of the year broadly as a time of stabilization of the economy," Sonali Jain-Chandra, China Mission Chief of the Asia and Pacific Department of the IMF, told the Global Times on Tuesday.

China released its foreign trade data from January to October, recording year-on-year growth of 0.03 percent year-on-year amid weak external demand.

"We should recognize that over the last decade China has substantially rebalanced. Its growth has come from not just relying on exports, but also towards domestic demand...China has focused more on high-quality growth and more inclusive, sustainable growth. Therefore it is relying a lot more on domestic demand as opposed to export driven growth," Gopinath said.