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IMF Demands China Shift Growth Model
19 Feb
Summary
- IMF faults China's economic policies for global damage.
- China urged to prioritize domestic consumer spending.
- IMF forecasts China's growth slowing to 4.5% this year.
The International Monetary Fund (IMF) has issued a strong recommendation for China to fundamentally transform its economic growth model. The IMF's executive directors stated that China's current approach, which relies heavily on exports, causes waste domestically and damages other economies. They are calling for a comprehensive shift prioritizing consumer spending and implementing forceful macroeconomic policy support alongside structural reforms.
The IMF review highlighted China's substantial current-account surplus and its adverse spillover effects on trading partners, partly attributed to a weaker renminbi. While China's representative contested some findings, the IMF board maintained its call for policy framework changes. They suggested measures like fiscal stimulus and central government funding for unfinished properties to rebuild consumer confidence.
The fund projects China's GDP growth to slow to 4.5% in 2026, down from 5% in 2025. The IMF also expressed concern over deflationary pressures linked to a demand slump and the property sector's correction, noting that government debt is expected to continue rising. The organization recommended greater exchange rate flexibility and scaling back industrial policies to boost productivity and reduce misallocation of resources.
