Press Briefing Transcript: China Article IV Consultation

IMF News, December 12, 2025

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Growth projections: 5 percent in 2025 and 4.5 percent in 2026.
Revisions: upward revisions from the October World Economic Outlook of 0.2 and 0.3 percentage points for 2025 and 2026, respectively.
Global context: China is contributing about 30 percent to global growth; IMF global growth projection for 2026 is 3.2 percent.
Drivers in 2025: strong exports and welcome fiscal stimulus supported the 5 percent outcome; net exports contributed 1.1 percent of the 5 percent growth rate in 2025.
Near-term outlook: slight slowdown in 2026 driven by anticipated falling exports and the time required for domestic sources of growth to take hold.
Structural headwinds noted: slowing productivity growth, high corporate and public debt levels, decreasing returns to investment, and an aging population.

Persistent weak domestic demand driven in part by a shaky property sector, depressed consumer confidence, and deflationary pressures.
Real exchange rate: lower inflation relative to trading partners has produced significant real exchange rate depreciation, making exports cheaper and prolonging export reliance.
Property-sector fiscal estimate: fully resolving the property sector problem would require spending over the next three years 5 percent of GDP.
Interaction with consumption: unfinished real estate problems reduce household wealth and raise precautionary saving; addressing the property sector comprehensively should revive consumer confidence and support consumption.

Overarching priority: pivoting from export-led to consumption-led growth is the IMF's central recommendation.
Recommended macro package:
- Additional fiscal stimulus combined with further monetary policy easing and greater exchange rate flexibility.
- Fiscal policy to prioritize strengthening the social protection system to reduce excess saving and boost consumption.
- Specific social-policy suggestions: raise social spending, especially in rural areas; accelerate Hukou reforms to provide migrant workers with access to social benefits — IMF analysis suggests this could boost consumption by up to 3 percentage points of GDP in the medium term.
- Greater exchange rate flexibility: a market-based exchange rate that can move in both directions, reflecting fundamentals (no explicit recommendation to appreciate the Renminbi was made).

Structural reforms to lift medium-term growth:
- Reduce regulatory burdens and lower barriers to internal trade, particularly in the services sector.
- Level the playing field among firms and reduce distortions from industrial policy.
- Implement labor market measures to reduce skill mismatches and youth unemployment.
- Harness AI and energy-efficiency gains while mitigating labor market dislocations and new financial stability risks.
Labor market and youth employment:
- Youth unemployment: 17 percent in October.
- IMF policy advice: combine labor market flexibility with social protections ("flexicurity"), active labor market policies (job search and matching assistance, retraining programs), and service-sector opening to create job-rich opportunities.
- On AI: IMF assessment finds about 40 percent of jobs globally will be impacted (enhanced, changed, or eliminated); large-scale skills and mobility measures are needed.

Debt and financial stability:
- Years of high investment have left high public and corporate debt and elevated risks.
- Government debt-swap program provides short-term relief; unsustainable local government debt will need restructuring.
- Recommend reforms to strengthen financial-sector oversight, fiscal discipline, and transparency.
Industrial policy:
- IMF findings: measured impact of industrial policy on productivity shows a loss of 1.2 percent due to resource misallocation.
- Recommendation: scale back public support to selected firms and sectors where not justified; set a high bar for industrial-policy use.
- Fiscal reallocation: savings from reduced industrial policy support could be redeployed to social spending and to resolve real estate sector problems.

IMF calculation of comprehensive progress on three priorities (boosting consumption, structural reforms, addressing debt):
- Could raise China's GDP level by about 2.5 percent by 2030.
- Could create some additional 18 million jobs by 2030.
- Could reduce deflationary pressures, lead to real exchange rate appreciation, and produce a smaller current account deficit.

Current account and valuation references:
- Year-to-date current account surplus noted in 2025: 3.3 percent of GDP (questioner citation).
- Prior current account (2024) cited as 2.3 percent of GDP.
- External Sector Report reference: IMF estimated the yuan was undervalued by 8.5 percent based on last year’s current account surplus.
IMF stance:
- External-position assessment for 2024 was that China was moderately stronger than fundamentals implied; 2025 assessment is forthcoming in the 2025 Report.
- Policy advice emphasizes greater nominal exchange-rate flexibility and macro policies focused on boosting domestic demand; no explicit recommendation to appreciate the Renminbi was made.

IMF preparedness index for AI: China ranks number one among emerging markets on four indicators (digital infrastructure, labor market adaptability, innovation diffusion, and regulation).
IMF view: significant opportunities from R&D and AI; recommend relying more on market-driven private bets and competition rather than oversized public bets to allocate resources.
Spillovers: China’s tech and green-technology advances (including EV adoption) are positive for global outcomes, but excessive industrial support can create misallocation and external imbalances.

Trade figures and concerns:
- Reporter citation: China’s $1 trillion trade surplus referenced in questions.
- IMF message: China’s continued reliance on exports risks provoking protectionist responses; accelerating the shift to domestic consumption would be beneficial for China and the global economy.
Contribution to global growth: IMF projects China will continue to contribute positively; "around 30 percent" contribution to global growth over the next couple of years is expected, though it may decline somewhat as the economy rebalances.

Press Briefing Transcript: China Article IV Consultation — December 12, 2025 (IMF Communications Department).