## How China’s Economy Can Pivot to Consumption-led Growth

_IMF News, February 18, 2026_

## Source details

**Canonical URL:** [How China’s Economy Can Pivot to Consumption-led Growth](https://www.imf.org/en/news/articles/2026/02/18/cf-how-chinas-economy-can-pivot-to-consumption-led-growth)

## Other formats

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## Bibliographic details
- Authors: Daniel Garcia-Macia
- Published: February 18, 2026

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### Overview and recent performance
- China’s economy expanded by 5 percent in 2025.
- The IMF projects 4.5 percent growth this year, up 0.3 percentage points from the October forecast.
- Growth has been supported by robust exports and fiscal stimulus, but domestic demand remains subdued.
- The protracted property slump and a weak social safety net have reduced consumers’ willingness to spend, generating deflationary pressures and making growth increasingly dependent on external demand.
- China accounts for about 30 percent of global growth.

### Policy priority: pivot to consumption-led growth
- Pivoting to consumption-led growth is the overarching policy priority because relying on ever higher exports is not a durable strategy.
- The 15th Five-Year Plan (2026-30) prioritizes increasing consumption as a driver of economic growth.
- A gradually increasing retirement age, building on the 2024 reform, will help reduce the drag from a contracting labor force and boost economic prospects.

### Fiscal and macroeconomic recommendations
- Recommend a comprehensive macroeconomic policy package focused on:
  - Additional fiscal stimulus.
  - Further monetary policy easing.
  - Greater exchange rate flexibility.
- Expected outcomes: lift inflation to a healthy level, raise domestic demand, and reduce dependence on exports.
- Rebalance fiscal composition by paring back public investment and industrial policies supporting specific industries:
  - This would free budgetary resources to increase social spending.
  - It would improve resource allocation and potentially increase productivity.
  - It would allow fiscal support to address the property sector contraction, including supporting buyers of unfinished housing.

### Strengthening social protection to boost consumption
- Fiscal policy should prioritize strengthening social protection (healthcare, pensions, unemployment benefits, social assistance) to increase consumers’ confidence to spend.
- Scope exists for increased benefits and broader coverage across these areas to reduce precautionary saving.
- Evidence cited: doubling social spending in rural areas can lead to a cumulative increase in consumption over a five-year horizon, reaching 2.4 percentage points of gross domestic product.
- Hukou reform: easing household registration requirements can significantly lower saving rates.
  - Granting urban status to 200 million rural migrants could raise the consumption-to-GDP ratio by an additional 0.6 percentage points.
- Tax policy: making taxes on labor more progressive and strengthening taxes on capital can reduce inequality and increase disposable income for lower-income people who tend to spend more, encouraging additional consumption.

### Expected impact of IMF recommendations
- Taken together, the IMF’s policy recommendations could boost the consumption-to-GDP ratio by about 4 percentage points over five years.
- A better-balanced, consumption-led growth model would make China less dependent on external demand and increase resilience, with positive spillovers for the global economy.

*By Daniel Garcia-Macia, Sonali Jain-Chandra, Siddharth Kothari, Yizhi Xu, February 18, 2026 — IMF News*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [STAFF REPORT](https://www.imf.org/en/publications/cr/issues/2024/08/01/peoples-republic-of-china-2024-article-iv-consultation-press-release-staff-report-and-552803)
- [CHINA AND THE IMF](https://www.imf.org/en/countries/chn)
- [WORKING PAPER](https://www.imf.org/en/publications/wp/issues/2025/12/12/reforms-to-reduce-chinas-high-household-savings-572507)
- [2024 BLOG](https://www.imf.org/en/news/articles/2024/08/02/cf-chinas-service-sector-is-an-underutilized-driver-of-economic-growth)
- [PRESS CENTER](http://presscenter.imf.org/)
- [IMF Country Focus](https://www.imf.org/en/news/country-focus)
- [address the property sector contraction](https://www.imf.org/en/news/articles/2024/02/02/cf-chinas-real-estate-sector-managing-the-medium-term-slowdown)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2026/02/18/cf-how-chinas-economy-can-pivot-to-consumption-led-growth_