Beijing (Brussels Morning Newspaper) – The International Monetary Fund on Wednesday called for Beijing to speed up structural reform, and said China’s economy is projected to grow by 5 per cent in 2025 before slowing to 4.5 per cent in 2026.
As reported, the manufacturing behemoth is expected to contribute up to 40% of global growth in 2025 and has reported a $1 trillion trade surplus for the first time.
This has led to criticism that China’s slowing economy depends on controlling a greater portion of international trade and flooding emerging markets with low-cost goods that were diverted from the United States as a result of President Donald Trump’s tariffs.
Why does the IMF say export dependence is unsustainable?
“China’s large economic size and heightened global trade tensions make reliance on exports less viable for sustaining robust growth,”
the IMF stated in a press release marking the conclusion of the global lender’s regular assessment of its economy.
“The key policy priority for China is to transition to a consumption-led growth model, away from an overreliance on exports and investment.”
“This transition requires more urgent and forceful expansionary macroeconomic policies, reforms to reduce elevated household savings, and a scaling back of inefficient investment and unwarranted industrial policy support,”
What factors led the IMF to raise China’s forecast?
The IMF raised its 2025 growth estimate for China from 4.8% to 5.0%, but cautioned that policymakers would still face challenges due to the country’s weak property sector, local government debt, and declining domestic demand. Up from 4.2%, the Chinese economy is now predicted to grow by 4.5% in 2026.
“China’s economy has shown notable resilience despite multiple shocks in recent years,”
the IMF said.
“Macroeconomic policy support should also be accompanied by stepped-up reforms to strengthen the social protection system and support the property sector adjustment,”
the IMF said.
What risks do property weakness and local debt create?
In order to increase confidence and consumption, the IMF also recommended that China support changes in the real estate sector and fortify its social protection system.
According to the fund, the Chinese government acknowledged this need and implemented supportive policies, such as monetary easing and expansionary fiscal policy, targeted measures to boost household spending and stabilize the real estate sector, and addressing “involution,” or fierce competition that drives down prices, in some industries.
Beijing keeps a close eye on the IMF’s “Article IV” review to see if it approves or disapproves of its economic management. In the face of growing tensions with important trading partners, Beijing’s support is a useful countermeasure.
The head of the International Monetary Fund previously urged China to enact “a comprehensive package of pro-market reforms” in March 2024 in order to stimulate the country’s faltering economy, which was plagued by a housing market crisis, low domestic demand, and persistently high youth unemployment.
Speaking at the China Development Forum in Beijing, IMF Managing Director Kristalina Georgieva expressed that the
“transition from high rates to high quality of growth is the right fork in the road to take and China is determined to do so.”
