IMF Managing Director Kristalina Georgieva delivered a speech at the China Development Forum in Beijing, calling for greater vigilance over the global financial system. She highlighted the increased risks to financial stability, citing the recent banking crisis, and the need for continued collaboration among major central banks to ease market stress. While acknowledging the uncertainty of the current situation, she pointed out that there were “green shoots” emerging in the world’s second-largest economy, China, where the recently reopened economy is expected to expand by 5.2% this year, which is roughly in line with Beijing’s official target of 5%.
Georgieva reiterated the IMF’s projection that the world economy will see growth slow to just under 3% this year, due to continued fallout from the pandemic, the war in Ukraine, and tighter monetary policies. However, China’s rebound this year will allow it to contribute roughly one third of global growth, according to Georgieva. Any 1% increase in Chinese GDP growth would also help lift other Asian economies’ growth by an average of 0.3%.
Georgieva urged Chinese policymakers to take steps to shift its economy and “rebalance” it toward more consumption-driven growth. This would be “more durable, less reliant on debt, and will also help address climate challenges,” she said. She emphasized the need for the social protection system to play a central role by providing higher health and unemployment insurance benefits to cushion households against shocks. Georgieva also called for reforms to help “level the playing field between the private sector and state-owned enterprises, together with investments in education.” The combined impact of these policies could be significant, she said.
Global investors have been on high alert about the health of the banking sector following the sudden downfalls of Credit Suisse, Silicon Valley Bank, and US regional lender Signature Bank. Last week, concerns about Deutsche Bank and speculation over one of its bond payments also weighed on markets, prompting EU leaders to reassure the public over the resilience of Europe’s banking system. Georgieva said Sunday that the IMF was continuing to watch the situation and assess potential implications for the global economic
Georgieva warned of the increased risks to global financial stability but also highlighted the emergence of “green shoots” in China, which is expected to contribute significantly to global growth. She urged Chinese policymakers to take steps to shift the country’s economy toward more consumption-driven growth and called for reforms to level the playing field between the private sector and state-owned enterprises, together with investments in education.
