Beijing, China: An International Monetary Fund (IMF) team, led by Ms. Sonali Jain-Chandra, Mission Chief for China, visited Beijing and Shanghai from December 1 to 10 for the 2025 Article IV Consultation. The team held constructive discussions with senior officials from the government, the People’s Bank of China, private sector representatives, and academics on economic developments, risks, and policy priorities.
IMF Managing Director, Kristalina Georgieva, joined the discussions and met with Premier LI Qiang, Vice Premier HE Lifeng, PBoC Governor PAN Gongsheng, Minister of Finance LAN Fo’an, Minister of Commerce WANG Wentao, and other senior officials. IMF First Deputy Managing Director, Mr. Dan Katz, also joined part of the mission and met senior officials.
At the conclusion of the visit, Ms. Jain-Chandra issued the following statement:
“China’s economy has shown notable resilience despite facing multiple shocks in recent years. We project growth at 5.0 percent in 2025 and 4.5 percent in 2026. These reflect upward revisions of 0.2 and 0.3 percentage points, respectively, from the IMF’s October WEO, driven by recently-announced policy measures and reduced US-China bilateral tariffs. Headline inflation is expected to rise modestly from an average of 0 percent in 2025 to 0.8 percent in 2026.
“This resilience is being tested by continued imbalances. The prolonged property sector adjustment, spillovers to local government finances, and subdued consumer confidence have led to weak domestic demand and deflationary pressures. Low inflation relative to trading partners has led to real exchange rate depreciation, contributing to strong exports and supporting growth, but also exacerbating external imbalances, with the current account surplus projected to reach 3.3 percent of GDP in 2025. China’s large economic size and heightened global trade tensions make reliance on exports less viable for sustaining robust growth.”
“Long-standing structural challenges will also weigh on the economy over the medium term. Growth is expected to moderate due to slowing productivity growth, an aging population, elevated debt levels, and decreasing returns to investment.
“The authorities recognize the imperative of increasing consumption as a driver of growth. To this end, they have implemented welcome policy measures. These include expansionary fiscal policy, monetary easing, as well as some targeted measures to support consumption and the property sector. They have also taken steps to address “involution”, or excessive price competition, in certain sectors. Furthermore, the authorities have also increased the retirement age, which will lift potential growth, and are implementing local government debt swaps that will ease refinancing pressures.
“IMF staff agrees that the key policy priority for China is to transition to a consumption-led growth model, away from an overreliance on exports and investment. To support this transition, we recommend a more forceful policy package—implemented with greater urgency, while safeguarding financial stability and tackling debt vulnerabilities.
“First, tackling imbalances through more expansionary macroeconomic policies and complementary reforms to lower excessive household savings. Additional fiscal stimulus supported by monetary easing and greater exchange rate flexibility will boost domestic demand and help reflate the economy. Macroeconomic policy support should also be accompanied by stepped-up reforms to strengthen the social protection system and support the property sector adjustment—both of which will boost confidence and consumption. Meanwhile, scaling back unwarranted industrial policy support and inefficient investment will reduce resource misallocation. In addition to tackling domestic imbalances, such a policy package will also lead to real exchange rate appreciation and reduce external imbalances.
“Second, ensuring macro-financial stability and tackling debt vulnerabilities calls for fiscal and financial framework reforms and balance sheet cleanup. Restructuring the debt of unsustainable local government financing vehicles using insolvency frameworks can reduce fiscal strains and should be accompanied by a comprehensive plan to tackle financial sector spillovers and enhance fiscal frameworks. Stabilizing government debt will also require sustained fiscal consolidation over the medium term after deflationary pressures have durably abated.
“Third, structural reforms can lift medium-term growth by countering headwinds from slowing productivity and a shrinking labor force. Priorities include lowering barriers to internal trade, opening up the services sector, leveling the playing field across firms, and implementing labor market reforms to address skill mismatches and youth unemployment.
“Making progress on the three policy priorities outlined above could lift China’s GDP by about 2.5 percentage points by 2030 and reduce external imbalances. This would not only improve living standards and prosperity in China but also contribute to a stronger and healthier global economy.
“IMF staff look forward to our continued engagement with the Chinese authorities and to support their efforts to build a more resilient and balanced economy.”
The IMF team expresses its appreciation to the Chinese authorities for their warm hospitality, excellent organization, and open and constructive discussions throughout the mission.
