IMF’s Georgieva urges China to speed up shift from exports

BEIJING — China needs to “accelerate” support for domestic consumption and reduce its reliance on exports for growth, International Monetary Fund Managing Director Kristalina Georgieva has said.

“As the second-largest economy in the world, China is simply too big to generate much growth in exports and continuing to depend on export-like growth risks [and] furthering global trade tensions,” Georgieva told reporters Wednesday.

She said the country has to “accelerate” its decades-long plan to shift away from relying on exports for growth, adding it would be “beneficial for China, it is beneficial for the world economy.”

She said this change was “so as not to provoke other countries to take measures to curb down Chinese exports.”

Her comments came as trade tensions between China and the U.S. have escalated, while Europe and countries like Mexico are increasingly wary of the volume of cars and other goods coming from China. China’s trade surplus reached a record of more than $1 trillion for the year as of November.

Its consumer spending has remained tepid since the pandemic, partly as the ongoing real estate slump has weighed on household sentiment.

Georgieva said the IMF estimates China would have to spend about 5% of its GDP over the next three years to “resolutely” resolve property sector problems. She said this could be achieved with tighter management of fiscal and industrial policy.

She added that policymakers should be more proactive on finishing construction on pre-sold apartments — and be more decisive on allowing “unviable” Chinese developers to exit.

“We call them zombie firms. Well, let the zombies go away,” she said.

Georgieva also said IMF analysis found that raising spending on social support, especially in rural areas, could help boost consumption by up to 3 percentage points of GDP in the medium term.

She noted the need for specific policy measures, but emphasized the need for market forces to play a greater role, especially for China’s tech development and the yuan.

“What we want to see is a market-based RMB exchange rate that reflects fundamentals,” she added.

The IMF said in a release Wednesday that China’s low inflation, relative to trading partners, “has led to real exchange rate depreciation, contributing to strong exports and rising current account surplus.”

That’s a 0.3 percentage point increase from the IMF’s forecast in October. The organization also raised its forecast for 2025 growth by 0.2 percentage points to 5%.

The IMF said it expects inflation in China to rise to an average of 0.8% next year, up from 0% this year.

China earlier on Wednesday reported the consumer price index hit its highest in nearly two years at 0.7% growth in November from a year ago.

The IMF said Beijing’s transition to a more consumption-led growth model “requires more urgent and forceful” stimulus.

Chinese leaders in October announced development goals for the next five years would include greater efforts to boost consumption in addition to tech self-sufficiency. Top leaders are expected to hold an annual meeting later this week to discuss economic plans for next year.