The International Monetary Fund (IMF) has upgraded its outlook for China’s economy, projecting growth of 5 percent in 2025 and 4.5 percent in 2026, as recent policy stimulus and lower-than-expected tariffs provide a short-term boost.
The revised forecasts mark upward adjustments of 0.2 and 0.3 percentage points from the IMF’s October World Economic Outlook. IMF China Mission Chief Sonali Jain-Chandra said the economy had shown “notable resilience despite facing multiple shocks in recent years,” with growth supported by recently-announced policy measures and reduced US-China bilateral tariffs.
Despite the improved outlook, the IMF warned that underlying imbalances remain a concern.
Weak domestic demand, deflationary pressures and a prolonged property sector downturn continue to weigh on confidence, while low inflation has driven real exchange rate depreciation. While that has boosted exports, it has helped widen China’s current account surplus to a projected 3.3 percent of gross domestic product (GDP) for 2025.
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“China’s large economic size and heightened global trade tensions make reliance on exports less viable for sustaining robust growth,” Jain-Chandra said. She added that slowing productivity growth, an ageing population and elevated debt levels would likely dampen the country’s medium-term growth.
According to the IMF, Beijing needed to prioritise a decisive shift toward consumption-led growth, in line with its stated goals under the upcoming 15th Five-Year Plan. “To support this transition, we recommend a more forceful policy package implemented with greater urgency, while safeguarding financial stability and tackling debt vulnerabilities,” Jain-Chandra said.
Such a package should include expansionary macroeconomic policies and complementary reforms to lower excessive household savings, accompanied by social protection reforms and a scaling back of “unwarranted industrial policy support and inefficient investment,” she noted.
“Making progress on the three policy priorities outlined above could lift China’s GDP by about 2.5 percentage points by 2030 and reduce external imbalances. This would not only improve living standards and prosperity in China but also contribute to a stronger and healthier global economy.”
