International Monetary Fund urges stronger macro stimulus and social safety nets to pivot China to consumption-led growth

The International Monetary Fund published an analysis arguing that China needs a more forceful macroeconomic policy package and stronger social protection to shift its growth model toward domestic consumption and away from reliance on external demand. The IMF frames the pivot as necessary to counter weak domestic demand linked to the protracted property slump and a limited social safety net, which it associates with deflationary pressures and subdued consumer spending. In the IMF’s baseline, China’s economy grew 5 percent in 2025 and is projected to grow 4.5 percent in 2026, 0.3 percentage points higher than the October forecast. The recommended package centres on additional fiscal stimulus supported by further monetary easing and greater exchange rate flexibility, alongside a rebalancing of fiscal outlays away from public investment and industry-targeted industrial policies toward higher social spending and measures to address the property sector contraction, including support for buyers of unfinished housing. On social protection, it points to scope to expand benefits and coverage across healthcare, pensions, unemployment benefits, and social assistance, citing an IMF working paper estimating that doubling rural social spending could raise consumption cumulatively by 2.4 percentage points of gross domestic product over five years; it also estimates that granting urban status to 200 million rural migrants through easing the hukou system could lift the consumption-to-GDP ratio by 0.6 percentage points. The IMF estimates its combined recommendations could raise the consumption-to-GDP ratio by around 4 percentage points over five years.