IMF Urges China to Shift From Exports to Consumption
Udumbara
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Speaking at the launch of the IMF’s 2025 Article IV consultation with China, an annual “health check” of the country’s economy, Managing Director Kristalina Georgieva said Beijing should address “significant and pressing challenges” to its wider economic framework.
Georgieva said that China’s domestic demand remains persistently weak.
Low inflation relative to China’s trading partners has driven a real exchange-rate depreciation, which in turn has made exports cheaper and prolonged what the IMF describes as an “excessive reliance” on external demand.
“As the second largest economy in the world, China is simply too big to generate much growth from exports. And continuing to depend on export-led growth risks furthering global trade tensions,” the IMF chief said.
Growth
The IMF raised China’s growth outlook to 5 percent in 2025 and 4.5 percent in 2026, upgrades of 0.2 and 0.3 percentage points from its October projections.Georgieva said China is contributing about 30 percent of global growth, but warned that slowing productivity, high debt levels, and an aging population continue to weigh on the country’s prospects.
Recent steps include fiscal stimulus, easier monetary policy, efforts to curb excess savings, and a gradual rise in the retirement age to widen the labor pool. The government has also increased subsidies for child care and elderly care to support services-sector expansion.
Georgieva said these measures are encouraging but insufficient.
Recommendations
Georgieva said fiscal policy should shift toward strengthening China’s social protection system, particularly in rural areas and for migrant workers still constrained by the hukou registration regime.Under the hukou regime, every citizen is classified as either rural or urban, and access to key public services is tied to the place of official registration. The IMF estimated that deeper hukou reform and higher social spending could lift consumption by up to 3 percentage points of GDP in the medium term.
The fund also urged Beijing to scale back industrial policy support and public investment to improve resource allocation, cut fiscal costs, and free funds to address the property sector’s ongoing strains.
The IMF’s second priority is structural reform to support medium-term growth.
“We recommend reducing regulatory burdens; lowering barriers to internal trade, particularly in the service sector; leveling the playing field across firms; and implementing labor market measures to reduce skill mismatches and youth unemployment,” it said.
Such reforms, it added, would also help China make better use of emerging technologies, particularly artificial intelligence and energy-efficient innovations.
Georgieva said China is “well prepared to reap substantial gains from AI,” but warned that policymakers must manage job disruptions and financial risks. She also called for stronger financial oversight and tighter fiscal discipline.
She said progress in all three areas could lift GDP by 2.5 percent by 2030, create 18 million jobs, and narrow the current-account surplus.
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