China to contribute around 1/3 of growth

China will likely become the largest contributor to global growth in 2023 as the nation expects its consumption-led rebound to help boost economic activity in other economies, according to an official at the International Monetary Fund.

Steven Barnett, IMF's senior resident representative in China, said the fund expects China to contribute about one-third of global growth this year, making the country the single largest contributor.

According to the IMF's World Economic Outlook Update in January, global economic output is forecast to expand by 2.9 percent this year, for which China is expected to contribute about 1 percentage point, Barnett said.

China's growth rebound also has a positive growth spillover on other economies, he said, adding that faster growth in China can lift growth in other economies as the country buys more goods from elsewhere while Chinese tourists travel overseas.

The latest update revised up China's economic growth forecast for 2023 by 0.8 percentage point to 5.2 percent as the country optimized its COVID-19 containment.

"We don't think that China's rebound will drive global inflation," Barnett said. "We do not expect inflation in China to pick up that much."

China's economic rebound this year is likely to be driven more by consumption than infrastructure, which means that the spillover effect on commodity prices will be less than previous recoveries, he said.

Growth in China's consumer price index, a key indicator of inflation, remained mild at 2.1 percent year-on-year in January, whereas the United States reported CPI growth of 6.4 percent year-on-year for the same period, official data showed.

Barnett made the remarks at a seminar to discuss the global economic situation on Thursday, co-hosted by the IMF's office in China and the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

Zhang Bin, deputy director of the Institute of World Economics and Politics at CASS, agreed that consumption will be a major driver of China's economic growth this year as income growth accelerates while people's willingness to spend recovers.

Another pillar of the economic rebound is likely to be stabilizing real estate development investment, which will facilitate the recovery of related industries and prop up credit expansion throughout society, Zhang said at the seminar.

"But this does not necessarily mean that the economy can easily normalize to the level of full employment," Zhang said. "The biggest challenge facing China's recovery is the lukewarm momentum of private investment — a key determinant of the growth in employment, income and consumption."

There remains room for reducing interest rates to spur investment, reduce household costs and ease the government's ability to service debt, he said, adding that more financial support for real estate developers and mortgages remaining necessary.

Li Xin, IMF's deputy resident representative in China, also underlined the need for the country to alleviate financial stress facing some real estate developers, while suggesting further measures to boost vaccination rates and deepen structural reforms.