The International Monetary Fund released the press release and staff report for the 2025 Article IV consultation with the People’s Republic of China, finding that the economy has remained resilient but that its growth model faces mounting headwinds. The assessment links weak domestic demand and deflationary pressures to the protracted property-sector adjustment and spillovers to local government finances amid a debt overhang, with strong export growth partly offsetting the demand shortfall. The IMF notes that export performance has been supported in part by real exchange rate depreciation driven by weaker inflation in China relative to trading partners, and that higher net exports have contributed to emerging external imbalances with adverse spillovers. It argues that reliance on exports is less viable given China’s economic size and heightened global trade tensions, and flags that state-led, debt-financed investment and unwarranted industrial policy support have weakened productivity, increased financial vulnerabilities, and created excess supply in some tradable sectors; an aging population is also cited as a medium-term structural constraint. While acknowledging welcome measures and the authorities’ emphasis on boosting domestic demand, particularly consumption, the report characterizes the policy response to date as modest relative to the scale of the challenges.

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