IMF’s Gita Gopinath message to China on Covid zero: ‘Recalibrate strategy’

Gita Gopinath: “Urgent action at the central government level is needed to safeguard financial stability” in the real-estate sector, Gita Gopinath said.

China’s government needs to reduce risks in the property sector and adjust its Covid policy to alleviate disruptions to the economy, according to a senior International Monetary Fund official.

Gita Gopinath, first deputy managing director International Monetary Fund, is seen. (Bloomberg)

“Urgent action at the central government level is needed to safeguard financial stability” in the real-estate sector, Gita Gopinath, the first deputy managing director at the IMF, said in a video speech at the Caixin Summit in Beijing on Thursday.

The country also needs to “recalibrate the Zero Covid strategy to mitigate its economic impact,” which is critical to a sustained and balanced economic recovery, she said. Low inflation and weakening growth allow for greater policy support for households, which would bolster consumption, she added.

China recently took major steps to offset the damage being done to the economy by stringent Covid controls and the property downturn, prompting optimism in financial markets. Even so, the slump in consumer and business activity last month suggests the recovery is still uncertain, especially with Covid cases surging again.

Speaking about the dollar’s strength, Gopinath called on global central banks to focus on maintaining price stability with monetary policy while letting exchange rates adjust. Countries should conserve foreign exchange reserves for when financial conditions worsen as the global economic outlook darkens, she said.

The IMF forecasts China’s economy to expand 4.4% in 2023, rebounding from its projected 3.2% growth this year.