China says it is at a crossroads as officials meet CEOs

By Colleen Howe and Jing Xu

BEIJING (Reuters) – China must “reinvent itself” with economic policies aimed at speeding up the resolution of its real estate market crisis and boosting domestic consumption and productivity, International Monetary Fund Managing Director Kristalina said on Sunday Georgieva.

“China is at a crossroads: building on policies that have worked in the past or reinventing itself for a new era of high-quality growth,” Georgieva told a meeting of senior Chinese officials and leaders of global companies.

Officials who spoke at the opening of the China Development Forum expressed confidence in China's ability to achieve its economic goals, including growth of around 5 percent this year, and vowed more support businesses in strategically important sectors, an area that Chinese President Xi Jinping has called “new.” productive forces. »

But these commitments have fallen short of the more radical changes advocated by the IMF. Georgieva said an IMF analysis showed a more consumer-focused set of policies could add $3.5 trillion to China's economy over the next 15 years. If realized, this increase would amount to additional output equivalent to twice the size of the South Korean economy.

To do so, China should take “decisive” steps to complete unfinished housing stalled by bankrupt developers and reduce local government debt risks, the IMF chief said.

“A key feature of high-quality growth will have to be greater dependence on domestic consumption,” said Georgieva, a Bulgarian economist. “To achieve this, we must increase the purchasing power of individuals and families.”

Other economists have also advocated a new growth model for China. But the IMF's remarks were significant because they came at the start of a two-day meeting in which Beijing seeks to send the message that China is open for business.

Foreign investment flows into China fell nearly 20% in the first two months of the year, data showed Friday, and authorities have stepped up efforts to attract investors at a time when many companies seek to “de-risk” supply chains. and operations outside China.

In 2023, foreign direct investment in China contracted by 8%, reflecting a fragile economic recovery and tensions with the United States and its allies over a range of issues.

Apple CEO Tim Cook, the top executive at the Beijing event, told Chinese state broadcaster CGTN that he had an “exceptional” meeting with Chinese Premier Li Qiang.

Cook was quoted in the CCTV Finance newspaper, which said that Apple's Vision Pro would hit the mainland Chinese market this year and that the company would continue to increase its research and development investment in China.

“I think China is really opening up,” Cook told a CGTN interviewer on the sidelines of the meeting. He then said Apple's China-based suppliers have helped make progress in more sustainable manufacturing, including reducing water consumption and recycling metals like aluminum and cobalt.

Stephen von Schuckmann, a board member and executive at ZF Group who oversees the auto supplier's battery power operations, said the company was committed to China, a global leader in car sales and production. electrical.

“We are not following the talk and hype about an exodus in the supply chain,” he said in remarks published by CGTN. “We're invested. We're here to stay.”

More than 100 foreign leaders and investors attended the China Development Forum and a series of small closed-door sessions with Chinese officials on Friday and Saturday.

China's cabinet last week unveiled measures to attract investment, including expanded market access and pilot programs to encourage investment in science and technology.

On Sunday, Li said China's previously announced $140 billion ultra-long-term bond issuance plan would create a fund to boost investment and stabilize growth.

Other officials highlighted Xi's commitment to boosting investment in “new productive forces,” sectors that officials say include networked electric vehicles, spaceflight and cutting-edge drug development.

(Reporting by Xu Jing, Qiaoyi Li, Colleen Howe and Joe Cash in Beijing; Writing by Kevin Krolicki; Editing by Lincoln Feast and Louise Heavens)

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