Opening Remarks: 2025 IMF China Article IV Consultation Press Briefing
Welcome to this briefing, where we share IMF staff’s principal findings from the 2025 Article IV consultation with China—our annual check-up on the economy.
Over the last couple of weeks, our team held constructive discussions with Chinese authorities. We sincerely appreciate their cooperation and openness.
Starting with the updated outlook: despite sizable shocks, China’s economy has demonstrated notable resilience. We have raised our growth projections to 5.0 percent for 2025 and 4.5 percent for 2026, signaling upward revisions of 0.2 and 0.3 percentage points from our October World Economic Outlook. This improvement reflects robust exports and supportive fiscal measures. This resilient expansion has helped sustain household incomes, which is crucial given weak consumer confidence. China currently accounts for about 30 percent of global growth.
This stronger outlook creates room for the authorities to tackle the economy’s significant and persistent challenges. The authorities acknowledge these challenges and are taking steps in the right direction. We encourage them to act more decisively and with greater urgency.
Now, a closer look at the specifics.
Domestic demand in China has remained soft, partly because the property sector remains fragile. This has dampened consumer confidence, leading to weak consumption and deflationary pressures.
Low inflation relative to trading partners has driven a notable real exchange rate depreciation. While this makes Chinese exports cheaper, it also risks perpetuating an over-reliance on external demand and worsening external imbalances.
As the world’s second-largest economy, China cannot rely on exports alone to deliver strong growth. Continued export-led growth also risks fueling global trade tensions.
Added to these concerns are slower productivity growth, high corporate and public debt, diminishing returns on investment, and an aging population. Taken together, these factors point toward slower growth in the medium term.
Against this backdrop, China’s 15th Five-Year Plan emphasizes strengthening domestic consumption as a growth driver and reorienting the economy from goods to services. We view this pivot as the overarching policy priority.
Authorities are already taking steps to boost domestic consumption: adopting an expansionary fiscal stance, easing monetary policy, and implementing targeted measures to curb excess saving and reduce “involution.” They have gradually raised the retirement age to expand the labor force and raise medium-term growth prospects, and they’ve increased subsidies for elderly care and childcare to bolster the services sector.
Yet more needs to be done.
In our discussions, we urged bolder measures implemented with greater urgency. Three main focus areas stand out.
First: address domestic imbalances, particularly deflationary pressures. This will require a more expansionary macroeconomic policy mix, paired with reforms to reduce excess saving.
We recommend a comprehensive policy plan that combines additional fiscal stimulus with easier monetary policy and greater exchange-rate flexibility.
Fiscal measures should prioritize social protection to give households confidence to spend and to save less. Our analysis suggests that expanding social spending, especially in rural areas, and accelerating Hukou reforms to grant migrant workers access to social benefits could lift consumption by up to 3 percentage points of GDP in the medium term.
At the same time, public investment and industrial policies that subsidize selected firms and sectors should be scaled back. This would improve resource allocation, boost productivity, and place market forces at the forefront. Reducing industrial policy subsidies would also generate fiscal savings that could fund higher social spending and help resolve property-sector problems.
Overall, stronger consumption would unlock the vast potential of China’s domestic market, reducing both internal and external imbalances and delivering a more durable growth engine.
Second: structural reforms to lift medium-term growth. We advocate reducing regulatory burdens; easing internal trade barriers, especially in services; leveling the playing field among firms; and implementing labor-market measures to reduce skill gaps and youth unemployment.
These reforms would also help China harness new technologies, notably artificial intelligence and energy efficiency. While China’s digital infrastructure is well positioned to benefit from AI, it is important to manage potential labor-market disruptions and guard against new financial stability risks.
Third: address high domestic debt levels. Extended periods of high investment have left China with elevated public and corporate debt, elevating risks. The government’s debt-swap program provides short-term relief by easing financing pressures, but to minimize long-term costs, unsustainable local-government debt should be restructured. This should go hand in hand with reforms to strengthen financial sector oversight and to improve fiscal discipline and transparency.
What would be the benefits? Making meaningful progress in these three areas could raise China’s GDP by about 2.5 percent by 2030, create roughly 18 million new jobs, and reduce deflationary pressures. It would also help align the real exchange rate and reduce the current account surplus.
A more balanced Chinese economy, both domestically and externally, would contribute to a stronger, healthier global economy.
In summary, China has an opportunity to enter a new phase of development, shifting its growth engine from investment and exports toward domestic consumption, and transitioning the economy from goods to services. Seizing this opportunity will require courageous choices and resolute policy action.
We look forward to continuing our close collaboration with the authorities to support the creation of a more balanced and inclusive economy.
Thank you.
