The International Monetary Fund’s Executive Board completed the 2025 Article IV consultation with the People’s Republic of China and released the staff report with the authorities’ consent. The Board assessed that growth has remained resilient but that weak private domestic demand and muted inflation risk entrenching deflationary pressures and leaving exports to carry more of the expansion, and it called for a more comprehensive and forceful mix of macroeconomic support and structural reforms to transition toward consumption-led growth. Real gross domestic product grew by 5 percent in 2025, while headline inflation averaged 0 percent and the current account balance was estimated at 3.3 percent of GDP; growth is projected to slow to 4.5 percent in 2026 amid tariffs and trade policy uncertainty, with deflationary pressures expected to persist. The Board advised maintaining an expansionary fiscal stance until deflation subsides durably and shifting spending toward supporting consumption and facilitating the property sector adjustment, alongside further monetary easing and greater exchange rate flexibility. It highlighted measures including central government financing to tackle pre-sold unfinished housing, strengthening social protection to reduce precautionary savings, clarifying the “anti-involution” strategy and reducing local-government overinvestment, and scaling back unwarranted industrial policy. On longer-term debt sustainability, Directors supported delaying fiscal consolidation until durable reflation and restructuring unsustainable local government financing vehicle debt through insolvency frameworks, while upgrading fiscal frameworks to limit future debt buildup. For financial stability, they emphasized timely and transparent loss recognition, a move toward market-based pricing, a comprehensive strategy for legacy vulnerabilities including LGFV exposures, stronger systemic risk analysis, enhanced oversight, and upgraded crisis management and bank resolution frameworks.
International Monetary Fund 2026-02-18
International Monetary Fund Executive Board concludes China Article IV and calls for stronger fiscal stimulus and reforms to shift growth toward consumption
The IMF's Executive Board completed the 2025 Article IV consultation with China, noting resilient growth but weak private demand and muted inflation. The Board recommended a macroeconomic support mix and structural reforms for consumption-led growth, including fiscal expansion, monetary easing, and exchange rate flexibility. It advised addressing housing issues, enhancing social protection, and restructuring local government financing vehicle debt for long-term sustainability and stability.