China Urged to Address Property-Sector Issues

By Leika Kihara
WASHINGTON (Reuters) – China must do more to tackle its property-sector problems and has potential for increased stimulus to enhance consumption, stated Krishna Srinivasan, the director of the International Monetary Fund’s Asia and Pacific Department, on Thursday.

Srinivasan described the measures implemented by Beijing to repair its property sector as “steps in the right direction” but emphasized they are “not sufficient.” He noted that current actions fall significantly short of the IMF’s recommendation to support indebted developers with aid equating to 5% of China’s GDP over three to five years. This is necessary to help developers complete apartments and safeguard homebuyers.

Additionally, he stressed the need for enhancements in both the property sector and social safety nets. While he acknowledged some progress in pension reform, he pointed out that these have been minor steps, insisting, “We need much more.”

When asked if China could increase stimulus, Srinivasan expressed confidence, stating, “We believe they have space in the near term,” but cautioned that such measures should be balanced with fiscal consolidation in the medium term.

China’s economy recorded a growth of 5.4% in the first quarter, exceeding expectations, yet concerns loom over a potential downturn, primarily attributed to U.S. tariff policies, posing one of the most significant risks to the Asian economy in decades.

The IMF has revised its growth forecast for China down to 4% for this year and the next, a reduction of 0.6 and 0.5 percentage points, respectively, from its January projections, as increasing tariffs and ongoing trade policy uncertainty negatively influence exports and investments.

Despite these challenges, the IMF indicated that fiscal expansion in China’s 2025 budget could help mitigate some pressures from external factors.