IMF Urges China to Shift from Export-Led Economy to Domestic Consumption

The International Monetary Fund (IMF) has called on China to expedite structural reforms aimed at shifting its economy from an export- and investment-driven model to one led by domestic consumption. This appeal follows China's unprecedented trade surplus, which surpassed $1 trillion in the first 11 months of 2025.

In its annual Article IV consultation concluded on December 10, 2025, the IMF highlighted concerns over China's increasing reliance on exports amid global trade tensions. The Fund emphasized that this approach is unsustainable and recommended stronger macroeconomic stimulus, reduced household savings, and decreased dependence on inefficient investments and industrial policies. Despite challenges such as a weak property sector and local government debt, the IMF raised China's 2025 growth forecast to 5.0% from 4.8%, and its 2026 projection to 4.5% from 4.2%.

The IMF's Article IV consultation is an annual assessment where the Fund evaluates a member country's economic health and provides policy recommendations. For China, this involves discussions with government officials, the People's Bank of China, private sector representatives, and academics. The 2025 consultation was led by Sonali Jain-Chandra, the IMF's Mission Chief for China, and included meetings with senior officials such as Premier Li Qiang and PBoC Governor Pan Gongsheng.

China's trade surplus reached a record $1.08 trillion in the first 11 months of 2025, driven by a 5.9% year-on-year increase in exports in November, despite a nearly 29% decline in shipments to the U.S. This suggests China is diversifying its export markets to regions such as Southeast Asia, Africa, Europe, and Latin America.

The IMF's recommendations include implementing policies to boost domestic demand, encouraging increased consumer spending, and shifting focus towards more productive and sustainable economic activities. China faces a weak property sector, local government debt, and subdued consumer confidence, leading to weak domestic demand and deflationary pressures. In November 2025, the Consumer Price Index (CPI) increased by 0.7% year-on-year, while the Producer Price Index (PPI) fell by 2.2%, indicating persistent deflationary pressures.

Sonali Jain-Chandra stated, "China's economy has shown notable resilience despite facing multiple shocks in recent years." She emphasized the need for China to transition to a consumption-led growth model, noting that "China's large economic size and heightened global trade tensions make reliance on exports less viable for sustaining robust growth."

IMF Managing Director Kristalina Georgieva emphasized that China, given its size and a population of 1.4 billion, can no longer rely on exports for sustainable growth. She warned that continued dependence on export-led growth may heighten global trade tensions.

China's substantial trade surplus and its significant share in global growth have raised international concerns. Critics argue that China's export-driven strategy may lead to market saturation and increased trade tensions, particularly with emerging markets. The IMF's call for structural reforms aims to mitigate these issues by fostering a more balanced and sustainable economic model.

European companies are rapidly diversifying their supply chains away from China amid growing trade uncertainty, driven by Beijing’s self-reliance push and restrictive export controls. Over 70% of EU firms in China have reassessed their supply chains, with some shifting operations elsewhere.

The IMF's recommendations underscore the urgency for China to transition towards a consumption-led growth model. Implementing these structural reforms is crucial not only for China's sustainable economic development but also for maintaining balanced global trade relations.