ISTANBUL

The International Monetary Fund (IMF) said Wednesday that China's vast economic size, combined with rising global trade tensions, makes it relying on exports less viable for long-term 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," it said in a statement.

Stating that China’s economy showed notable resilience despite facing multiple shocks in recent years, it said the UN agency expects 5% growth in 2025 and 4.5% in 2026.

"These reflect upward revisions of 0.2 and 0.3 percentage points, respectively, from the IMF’s October WEO (World Economic Outlook), driven by recently announced policy measures and reduced US-China bilateral tariffs. Headline inflation is expected to rise modestly from an average of 0% in 2025 to 0.8% in 2026," the IMF noted.

It emphasized that the persistent imbalances are putting resiliency to the test. Weak domestic demand and deflationary pressures have resulted from the protracted property sector adjustment, spillovers to local government finances and muted consumer confidence.

"The authorities recognize the imperative of increasing consumption as a driver of growth. To this end, they have implemented welcome policy measures," it said.

The measures included expansionary fiscal policy, monetary easing, as well as some targeted measures to support consumption and the property sector.

“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," it noted.

The IMF gave three recommendations for a consumption-led growth model: tackling imbalances through more expansionary macroeconomic policies and complementary reforms to lower excessive household savings; ensuring macro-financial stability and tackling debt vulnerabilities calls for fiscal and financial framework reforms; and balance sheet cleanup, and making structural reforms to counter headwinds from slowing productivity and a shrinking labor force.

“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," it added.​​​​​​​