Washington, Feb 19 (NationPress) The International Monetary Fund has called on China to implement more vigorous measures to stimulate domestic demand and address economic imbalances, indicating that weak consumption and ongoing deflation could hinder growth and have repercussions for the global economy.

The IMF's Executive Board concluded its 2025 Article IV consultation with China on February 13 (local time), asserting that the economy “has shown remarkable resilience despite encountering numerous shocks in recent years.”

China's economy experienced a growth rate of 5 percent in 2025, with the IMF attributing this growth to “strong exports and policy stimulus.” However, it highlighted that “private domestic demand remained lackluster.”

Inflation was notably subdued, with the IMF stating, “headline inflation continues to be low, averaging 0 percent in 2025, while the GDP deflator continued its decline.”

Growth projections for this year indicate a slowdown, with GDP growth expected to decrease to 4.5 percent in 2026, reflecting the lasting impacts of tariffs and uncertainties in trade policy, according to the Fund. Inflation is expected to rise only gradually amid ongoing economic slack.

The IMF indicated that risks are “tilted to the downside,” warning that “a deeper-than-anticipated contraction in the property sector” could lead to “greater domestic demand weakness, entrenched deflation, and an ongoing reliance on exports.” Additionally, they noted that “renewed trade tensions represent a significant external downside risk.”

Directors emphasized that “transitioning to a consumption-driven growth model should be the primary focus.” They welcomed China's commitment to enhancing consumption within its 15th Five-Year Plan and urged for “a comprehensive and more forceful response that combines increased macroeconomic policy support with structural reforms.”

The IMF praised the fiscal expansion in 2025, suggesting that “an expansionary approach should remain until deflationary pressures are sustainably alleviated.” They recommended that spending shift “towards enhancing support for consumption and the property sector rather than inefficient investments.”

The policy strategy should incorporate further monetary easing and more exchange rate flexibility.

The IMF urged Beijing to tackle risks in the property sector, advocating for “central government funding to address unfinished housing that has been pre-sold.” They also recommended strengthening social protection to “reduce precautionary savings.”

Directors stressed “the necessity to dial back unnecessary industrial policies to minimize domestic resource misallocation, lessen fiscal burdens, and mitigate international spillovers.”

Regarding trade, the IMF highlighted China's “critical role in fostering open trade amid increasing fragmentation pressures.” They encouraged authorities “to engage constructively with partners to resolve trade disputes and exercise caution in using national security justifications for trade or investment restrictions.”

The IMF indicated that maintaining long-term debt sustainability will necessitate “significant fiscal consolidation over an extended period,” but suggested that this “should only commence once the economy has sustainably reflated.” They also called for restructuring local government financing mechanisms and enhancing fiscal frameworks.

China stands as the world’s second-largest economy and a pivotal force in global trade. In recent years, it has encountered stress in the property sector and rising local government debt, prompting targeted stimulus measures even amidst elevated trade tensions.