IMF Urges China to Prioritize Consumption-Led Growth, Curb Industrial Policy
BEIJING (AP) – The International Monetary Fund is calling on China to make a decisive shift towards a consumption-driven economy, while also advocating for a reduction in what it terms “unwarranted industrial policy” as global economic imbalances mount. The recommendations come ahead of Beijing’s annual parliamentary meetings and follow a year marked by a record trade surplus for China, raising concerns internationally.
Sonali Jain-Chandra, the IMF’s mission chief for China, emphasized the urgency of the transition in a recent interview with the South China Morning Post. “China needs to move decisively towards consumption-led growth,” she stated.
The IMF’s assessment, detailed in its annual review of the Chinese economy – known as the Article IV consultation – suggests a comprehensive policy package. This includes more robust fiscal stimulus aimed at boosting consumption and addressing challenges within the property sector, alongside strengthened social safety nets, further monetary easing, and increased exchange rate flexibility.
The IMF Executive Board echoed this sentiment, stating that transitioning to a consumption-led model “should be the overarching priority.” The board also recommended maintaining an expansionary economic stance until deflationary pressures are sustainably alleviated.
Beijing has already signaled a focus on consumption in its proposals for the 15th five-year plan and in the economic agenda set during December’s central economic work conference, a move welcomed by the IMF.
The call for reduced industrial policy reflects growing international scrutiny of China’s economic practices. China’s record trade surplus last year has fueled concerns about unfair trade advantages and potential protectionist responses from other nations. The IMF’s Beijing office is located at Room 1806, East Tower, Twin Towers No. B12, Jianguomenwai Avenue, Beijing 100022, P.R. China. https://www.imf.org/en/countries/chn