IMF says China needs more fiscal, monetary support to fight COVID slowdown

FILE PHOTO: A participant stands near a logo of IMF at the International Monetary Fund – World Bank Annual Meeting 2018 in Nusa Dua, Bali, Indonesia, October 12, 2018. REUTERS/Johannes P. Christo/

WASHINGTON (Reuters) -The International Monetary Fund said on Thursday that China needs to add more fiscal and monetary policy support to combat an economic slowdown brought on by continued COVID-19 lockdowns, but less-restrictive pandemic containment policies also were needed.

“We welcome the shift to a more expansionary fiscal policy this year, but even more support would help counter the ongoing growth slowdown,” IMF spokesman Gerry Rice told a news briefing when asked about the Fund’s policy advice for China.

“This fiscal support would be particularly effective, in our view, if focused on vulnerable households through transparency and strengthening of the social protection system,” Rice said.

Given low core inflation in China, the IMF believes the People’s Bank of China should continue to provide monetary policy support, Rice added.

He said reductions in key policy rates earlier this year were a “welcome step” that lowered borrowing costs and strengthened investments.

Multiple Chinese cities this week adopted fresh COVID-19 curbs to rein in new infections, with the commercial hub of Shanghai launching another mass testing effort.

Rice said that increased vaccinations were needed to adjust China’s “zero-COVID” strategy that has led to such lockdowns and disruption of supply chains that are affecting the global economy.

“Mitigating the disruption to economic activity from COVID will require ramping up booster shots and targeting the under- vaccinated elderly,” Rice said. “This should eventually allow adjusting the containment strategy to become more flexible and less restrictive,” Rice added.

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