By Jorgelina do Rosario, Karin Strohecker and Rodrigo Campos
LONDON (Reuters) – China will have to reconsider its zero-COVID policy to avoid further damage to the economy, as well as find a long-term solution to the housing crisis, a senior International Monetary Fund (IMF) official said in a statement. an interview.
The world’s second-largest economy has eased its strict COVID-19 restrictions, leaving citizens and businesses facing uncertainty about the threat of long-term lockdowns.
Krishna Srinivasan, director of the IMF’s Asia-Pacific department, told Reuters that China could apply additional lockdowns if it uses “effective vaccines, such as mRNA vaccines” and higher vaccination, especially among the elderly.
“China has made some adjustments to make it a little more flexible, but we believe this strategy may just be a drag on the economy,” Srinivasan said. “This is a challenge you want to solve. “
While China has moved away from the ravages of widespread infections and deaths, it lacks herd immunity and its large elderly population is at risk.
China’s COVID strategy has been one of the reasons the IMF cut the country’s gross domestic product (GDP) expansion forecast to 3. 3 from 4. 4 in its most recent World Economic Outlook (WEO) released this week.
This would be the country’s weakest expansion in more than 4 decades, with the exception of the initial COVID-19 crisis in 2020, the WEO report added.
China’s COVID policy is not the only thing the IMF considers about the economic slowdown. Rising space costs and emerging space debt have fueled a crisis in the real estate sector.
“The government’s goal of reducing debt in the real estate sector was correct, but it slowed growth,” Srinivasan said. “Now many families refuse to repay their loan because there are many housing projects that are not finished. “
Sources told Reuters on Monday that China will launch a real estate fund to help real estate developers cope with a crippling debt crisis, targeting a war chest of up to three hundred billion yuan ($44 billion).
This would be the state’s first major step in saving the real estate sector since the public debt riots last year.
Srinivasan said the move is a “solution,” but added that the amount might not be enough and suggested Beijing seek long-term sustainable solutions.
“You want to know which developers face what kind of restriction and how many of them are viable,” he said. “The strategy wants to be fully developed, and that’s what’s missing right now. “
(Reporting through Jorgelina do Rosario and Karin Strohecker in London, with Rodrigo Campos in New York and David Lawder in Washington; Editing via David Holmes)
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