The International Monetary Fund (IMF) on 9 July 2025 called on China to urgently overhaul its economic growth model, warning that persistently weak domestic demand, slowing productivity, and a rapidly ageing population pose serious structural risks to the world's second-largest economy in the years ahead.

What the IMF Said

Julie Kozack, Director of the IMF's Communications Department, made the remarks at the Fund's regular press briefing in Washington. She stressed that despite a modest upward revision to China's near-term growth forecast, longer-term structural vulnerabilities remain a major concern for the Fund.

'We have been emphasising for quite some time in our bilateral work with China, in our Article IVs, that we do see some significant structural challenges facing the Chinese economy,' Kozack said.

Key Structural Weaknesses Identified

According to Kozack, the IMF has flagged three interconnected problems. First, persistently subdued domestic consumption — and its counterpart, rising external imbalances driven by export dependence. Second, weakening productivity growth. Third, demographic headwinds from a rapidly ageing population.

'These include persistently subdued domestic demand, particularly domestic consumption, and the flip side of that is rising external imbalances,' she said, adding: 'China faces demographic headwinds from population ageing.'

The IMF's Prescription

The Fund's recommended remedy is a fundamental shift in China's growth strategy — away from export-led expansion and toward domestic consumption. Kozack said this would require 'more urgent and more forceful expansionary macroeconomic policies' alongside structural reforms to reduce exceptionally high household savings rates.

'It's going to require reforms to reduce very high levels of household savings, so that households, rather than saving a lot, also consume,' she said. The IMF also called for continued support for China's troubled property sector, describing it as a critical element of the broader reform agenda.

Growth Forecast and Context

The IMF's latest World Economic Outlook update projects China's growth to ease from 5% in 2025 to 4.6% in 2026. While the 2026 figure represents a slight upgrade from the Fund's April outlook, Kozack underscored that the revision does not diminish structural concerns. Economists have separately flagged that rising debt levels in the property sector and demographic shifts are likely to weigh on China's economic expansion over the coming decade.

Kozack's comments came in response to a question about China's uneven economic recovery despite multiple rounds of policy support announced by Beijing over the past year — a pattern that has drawn sustained scrutiny from multilateral lenders and independent analysts alike.

Why It Matters for the Global Economy

China remains the world's second-largest economy and a significant driver of global growth. A sustained slowdown driven by structural imbalances — rather than a cyclical dip — would have far-reaching consequences for commodity exporters, Asian supply chains, and global trade volumes. The IMF has consistently argued that rebalancing Chinese growth toward domestic consumption would not only benefit China's long-term resilience but also reduce external trade imbalances that have drawn friction with trading partners. Whether Beijing accelerates the reforms the Fund recommends remains the central question for global economic watchers in the months ahead.