The International Monetary Fund on Wednesday called on China to make “bold choices” and accelerate long-delayed structural reforms, warning that the world’s second-largest economy can no longer rely on export-driven growth fueled by debt.
Speaking at a press conference concluding the IMF’s annual review of China’s $19 trillion economy, Managing Director Kristalina Georgieva said China is now “too large to generate additional growth through exports alone,” adding that further dependence on the model risks heightening global trade tensions.
Georgieva urged Beijing to adopt a comprehensive policy package that combines expanded fiscal support with more accommodative monetary policy, alongside targeted measures to reduce ballooning local-government debt, resolve the prolonged property downturn, and strengthen social welfare systems.
China’s property sector, which represents roughly 70% of household wealth, remains at the center of its economic challenges. Georgieva estimated that fully resolving the sector’s crisis over the next three years will require government spending equivalent to 5% of GDP.
She added that stronger social spending and a faster overhaul of the decades-old hukou residence registration system could lift consumption by up to 3 percentage points of GDP, marking a significant shift toward domestic demand.
Georgieva cautioned that antagonizing trade partners could provoke new restrictions on Chinese exports, an outcome that “would not be in Beijing’s interest.”
Despite fears of overdependence on external demand, net exports contributed only 1.1% to China’s 5% growth this year. Still, China accounted for an estimated 30% of global economic growth in 2025, underscoring its central role in the world economy.
China also posted a record $1 trillion trade surplus for the first time, prompting criticism that weak domestic demand is forcing manufacturers to flood global markets with underpriced goods.
The IMF raised China’s growth forecast for 2025 to 5%, up from 4.8%, and its 2026 forecast to 4.5%, up from 4.2%, citing stronger-than-expected export performance.
Despite concerns about an undervalued yuan, the Fund refrained from recommending specific actions on the exchange rate, saying only that it supports greater currency flexibility “in both directions.”
Georgieva acknowledged China’s ambition to lead in advanced technologies, including artificial intelligence, but argued that private firms must play a larger role in shaping the country’s innovation agenda.
She called for a reduction in state-directed industrial investment and narrowing industrial subsidies targeted at select companies, reforms that could free fiscal resources for social spending and for addressing the property-sector crisis.
According to IMF estimates, China’s heavy industrial-policy orientation is weighing on productivity by 1.2%, but unwinding these policies will be politically and institutionally difficult for a planned economy as large as China’s.
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