Paris: The International Monetary Fund (IMF) said late Wednesday that shifting to a consumption-driven growth model should be a key priority for China and urged authorities to implement reforms to rebalance the economy toward domestic demand and reduce reliance on exports.
According to Anadolu Agency, the IMF noted that China’s economy has been resilient despite multiple shocks, benefiting from robust exports and fiscal stimulus, and continues to be a significant driver of global growth. The economy expanded by 5% in 2025, and a 4.5% growth is projected for this year, which is an increase of 0.3 percentage points from the October forecast.
Nevertheless, the IMF pointed out that the growth model of the world’s second-largest economy faces increasing challenges. Domestic demand has been weak due to a prolonged downturn in the property sector and an inadequate social safety net, which have negatively impacted consumer confidence and spending.
The statement highlighted that low inflation compared with trading
partners has led to a depreciation in the real exchange rate, resulting in strong exports and a current account surplus projected to reach 3.3% of gross domestic product.
The IMF emphasized that inflation is expected to rise slowly, with deflationary pressures persisting. In the medium term, growth is anticipated to weaken gradually because of a declining labor market, reduced returns on investment, and a slowdown in productivity growth.
The fund recommended a comprehensive macroeconomic package focused on robust fiscal stimulus, supplemented by additional monetary easing and increased exchange rate flexibility, to boost domestic demand and lessen dependence on exports.
Fiscal spending should be redirected from heavy public investment and targeted industrial policies to enhancing social protection and addressing the property downturn, including support for buyers of unfinished homes.
The IMF suggested that expanding health care, pensions, unemployment benefits, and social assistance would strengthen house
hold confidence and spending. Reforms to the household registration, or hukou, system could increase consumption by providing migrants with greater access to urban benefits.
The IMF also mentioned that more progressive labor taxes and stronger taxation of capital could help reduce inequality and raise disposable incomes for lower-income groups, further supporting consumption.
“Taken together, the IMF’s policy recommendations would significantly rebalance the economy toward consumption. They could boost the consumption-to-GDP ratio by about 4 percentage points over five years,” it added.