The IMF revised down its growth forecasts for China earlier on Tuesday, under the weight of a real estate crisis threatening the world's second biggest economy.
"We are particularly concerned with financial stability in China," said Tobias Adrian, director of the IMF's Monetary and Capital Markets Department, warning the housing market had "come under pressure in recent years."
He said that authorities had "taken steps to stabilize the housing market" but that local governments remained exposed, plus "local banks, particularly provincial banks, as well as the wealth management products to the real estate market."
"So ensuring that the financial system continues to work, that households continue to have a positive outlook on the economy are very important for growth and financial stability in particular going forward," he added.
The Chinese economy is now expected to grow by 5.0 percent this year -- down from 5.2 percent previously -- and slow further to 4.2 percent in 2024, down from 4.5 percent.
Fabio Natalucci, deputy director of the Monetary and Capital Markets Department, said it was "really crucial at this point to restore confidence in the real estate sector".
Natalucci said the two priorities should be completing existing housing projects and restructuring weak developers.
Earlier Tuesday the IMF's chief economist, Pierre-Olivier Gourinchas, had called for urgent action from Beijing to ensure that instability in the real estate sector did not destabilise the financial system.
Many leading Chinese property developers have come under increasing financial pressure over recent years, with astronomical levels of debt bringing bankruptcy concerns to the fore in a sector already damaged by the coronavirus pandemic and a broader economic slowdown in China.
The debt-saddled giant Country Garden -- one of China's biggest property developers -- said Tuesday that it did not expect to meet all of its offshore payment obligations in time as it edges towards a potential default.
Country Garden had racked up debts estimated at 1.43 trillion yuan ($196 billion) by the end of 2022.
Its rival, property developer Evergrande, holds debt adding up to more than $300 billion and defaulted in 2021.
Pharrell Williams to hold Vuitton show in Hong Kong
Paris (AFP) Oct 10, 2023 -
Musician-turned-designer Pharrell Williams will hold his second show as creative director for Louis Vuitton in Hong Kong, the brand announced on Tuesday.
Williams will hold a "pre-fall show" for his menswear line on November 30, following his glitzy debut at Paris Fashion Week in June.
It emphasises the importance of Chinese consumers to Louis Vuitton, which said it "found the cultural vibrancy of this island archipelago an ongoing source of inspiration".
Williams succeeded Virgil Abloh, the first black American to helm a major French label until his death from cancer.
The "Happy" singer's appointment was seen as reflecting a broader merging of fashion, hip-hop and pop culture, though it goes against the grain of most recent appointments at big labels such as Gucci and Chloe who have opted for less flashy but technically proficient artisans.
His first show in June saw Paris's historic Pont Neuf bridge painted gold for a celeb-packed party featuring a concert by Jay-Z.
It demonstrated the spending power of the label, which helped boost profits at parent company LVMH by 30 percent to 8.48 billion euros ($9.34 billion) in the first half of the year.
"What it is that I was brought in here to do is to push expansion and growth not only in sales, but in perspective, culturally," Williams told Business of Fashion this week.
IMF lowers China 2023 economic growth forecast to 5.0%
Beijing (AFP) Oct 10, 2023 -
The International Monetary Fund has cut its 2023 economic growth forecast for China to 5.0 percent from 5.2 percent, according to a report published on Tuesday.
With an unprecedented property crisis stifling economic activity and weighing on household confidence, the IMF also slashed its 2024 estimate to 4.2 percent from 4.5 percent.
"China's growth momentum is fading following a Covid-19 reopening surge in early 2023," the IMF's twice-yearly World Economic Outlook said.
"High-frequency indicators suggest further weakness with the property sector crisis in the country leading the factors hampering growth," it added.
If the IMF's forecast for this year plays out, it would be in line with Beijing's own target of "around 5.0 percent", but softer than the projection in its July report.
China's economy expanded just 3.0 percent last year -- well below the official target of 5.5 percent -- as it was choked by draconian Covid-19 measures.
The country's key real estate sector generally accounts for around a quarter of GDP, but the industry has lurched from one crisis to another in recent years, with major firms crippled by mountains of debt.
Debt-laden property giant Country Garden said Tuesday that it did not expect to meet all of its offshore payment obligations in time as it teetered towards a potential default.
Its competitor Evergrande, which has debts hanging over it of more than $300 billion, is on the verge of bankruptcy while its boss faces a criminal probe.
Over the past two years, the debt woes of property groups have fuelled mistrust in a sector that was once highly lucrative.
"This is undermining home buyer confidence and prolonging the property sector downturn," the IMF report warned.
The IMF's chief economist Pierre-Olivier Gourinchas called for "forceful action" by the Chinese authorities to help struggling property developers with restructuring.
He said this would ensure financial instability does not "spread out into the broader financial system and help restore confidence of households".
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