IMF calls on China to boost spending and reduce export dependence

The International Monetary Fund is urging China to reduce its reliance on exports and boost domestic consumption, warning that structural reforms, fiscal stimulus, and property market adjustments are essential to sustain long-term economic growth.

The International Monetary Fund has called on China to accelerate structural reforms and shift decisively toward a consumption-driven growth model, warning that the country is now “too big” to rely on exports without increasing global trade tensions. The appeal came as the IMF concluded its annual Article IV review in Beijing, where Managing Director Kristalina Georgieva pressed policymakers to adopt more fiscal stimulus, ease monetary policy and take stronger steps to resolve the country’s deepening property crisis and rising local government debt.

The IMF raised its forecast for China’s economic growth to 5% in 2025 and 4.5% in 2026, citing strong outbound shipments and a record $1 trillion trade surplus this year. However, Georgieva emphasized that continued dependence on exports — which contributed 1.1 percentage points to this year’s GDP — risks provoking further tariffs and restrictions from major trading partners already concerned about an influx of cheap Chinese goods. She added that stronger social spending, including reforms to the country’s restrictive “Hukou” household registration system, could lift consumption by up to 3 percentage points of GDP.

A key challenge remains the protracted property slump, with the IMF estimating that China will need to spend around 5% of GDP over the next three years to stabilize the sector, which accounts for about 70% of household wealth. Georgieva urged Beijing to allow unviable “zombie” developers to exit the market and to scale back industrial policies that the IMF says are dragging productivity by 1.2%. Redirecting these resources, she noted, could strengthen social welfare and support private-sector innovation. While acknowledging China’s readiness for AI and new technologies, the IMF chief said empowering private firms and encouraging domestic consumption — particularly among young people — will be essential for the country’s next phase of growth.