Consumption and cooperation to lead growth, says IMF expert

China's GDP grew in 2023 by 5.2 percent, beating the country's 5 percent target - but in a still-sluggish post-pandemic economy, all countries are looking for ways to maintain economic development, says an expert from the International Monetary Fund (IMF).

Speaking to CGTN Europe, Steven Barnett - the IMF's Senior Resident Representative in China - says that although all economies face challenges in a changing world, China continues to be an engine of economic growth. 

"The history of household consumption in China is interesting," says Barnett. "Over the two decades before the pandemic, it grew faster than anywhere else in the world - but consumption as a share of GDP in China is very low.

"The problem was that GDP was growing faster than consumption. So the challenge for policymakers is to switch that and have a pattern of growth where consumption continually grows faster than GDP."

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The property market in China has had its problems, but Barnett remains confident that the situation will resolve itself.

"What we're seeing is a very large and necessary adjustment in the real estate sector to a more sustainable size, and the government's effort to right-size this market was always going to be challenging," he said. "The key is to try to do it in a way that minimizes costs. 

"We at the IMF think that supply was running way ahead of underlying demand. And at the same time housing is also unaffordable. But once the adjustment takes place - and we have seen progress - the economy will be on a much more sustainable footing."

Cooperation not confrontation

In a globalized economy, no country stands alone. Understandably, working for the IMF, Barnett is keen to see greater cooperation between countries - and he highlights two areas in particular. One is climate change.

"Climate change poses an existential threat," he says. "And there's no way to address climate change, any one country by themselves. That's a great example where really the world has to work together."

The other area needing multilateral cooperation is trade.

"Trade has been such an important engine of growth for many decades - it has helped lift billions of people out of poverty," he says. "We need to get back to a world where trade is the engine of growth, instead of a world where we're talking about fragmentation. We've estimated that in an extreme scenario, trade fragmentation could wipe out 7 percent of global GDP. 

"Rather than fragmentation, let's strengthen the multilateral trade system - whether that's undoing recent trade restrictions put in place and lowering recent tariffs or basically strengthening the WTO, including reaching agreements in areas of the modern economy such as e-commerce, services and investment."