On 18 February 2026 an IMF Country Focus was published, generally based on the report issued by the IMF following consultations with China under Article IV of the IMF’s articles of agreement.
China’s economy has remained resilient through various economic shocks and real GDP grew by 5% in 2025. GDP growth is projected to slow to 4.5% in 2026, as a result of the effects of tariffs and trade policy uncertainty. Over the medium term, growth is expected to decelerate due to a declining labour force, decreasing returns to investment and slower productivity growth. The Article IV report noted that the main domestic risk would be from a deeper contraction in the property sector, weaker domestic demand, entrenched deflation and continued reliance on export-led growth. The main external downside risk is from a renewed escalation of trade tensions.
The IMF considers that policy should prioritise a transition to consumption-led growth. This is the focus of China’s 15th Five-Year Plan on boosting consumption. Addressing domestic imbalances and reflating the economy will require more expansionary macroeconomic policies, focusing on fiscal stimulus.
The IMF report noted that structural reforms should be implemented to rebalance the economy toward consumption. Facilitating the property sector adjustment would rebuild consumer confidence, and strengthening the social protection system would lower precautionary savings. China should reduce unnecessary industrial policy support; and proceed with tax and social security reforms. The debt of unsustainable local government financing vehicles (LGFVs) should be restructured through insolvency frameworks.
Market-oriented reforms could include opening up the services sector and promoting competitive neutrality across firms. Policies should aim to harness the potential of AI while mitigating risks. The IMF notes that there is scope for further increases in the retirement age to mitigate economic pressures. Improving the quality and transparency of data collected by the government can enhance policymaking.
Priority should be given to strengthening social protection, to encourage people to increase consumption. Improvements in level and coverage of healthcare, pensions, unemployment benefits and social assistance would reduce the need for vulnerable people to save excessively to protect against unexpected shocks. Easing household registration requirements under the hukou system could give migrant workers from rural areas full access to social benefits in large cities. The IMF estimates that granting urban status to 200 million rural migrants could increase the consumption-to-GDP ratio by 0.6 percentage points.
The IMF considers that making taxes on labour more progressive and increasing taxes on capital could reduce inequality and lead to an increase in the disposable income of lower-income groups. As lower income groups tend to spend more of their income, this would encourage additional consumption.
