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

BEIJING — International Monetary Fund Managing Director Kristalina Georgieva said China should “accelerate” its support for domestic consumption and reduce its dependence on exports for growth.

“China, the world’s second-largest economy, is too large to generate much growth in exports and remains dependent on export-like growth risks.” [and] “It is increasing global trade tensions,” Georgieva told reporters on Wednesday.

He said the country needed to “accelerate” its decades-long plan to move away from dependence on exports for growth, adding that it would be “beneficial for China, it would be beneficial for the world economy.”

He said this change was “to avoid provoking other countries to take measures to restrict Chinese exports.”

His comments come at a time when trade tensions between China and the United States are rising, while countries such as Europe and 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.

Consumer spending has remained stagnant since the pandemic, in part because the ongoing property slump has weighed on household confidence.

Georgieva said the IMF estimates China will have to spend about 5 percent of GDP over the next three years to “decisively” resolve its real estate sector problems. This could be achieved through tighter management of fiscal and industrial policy, he said.

He added that policymakers should be more proactive in ending construction of previously sold flats and be more determined to allow “unviable” Chinese developers to exit.

“We call them zombie companies. Well, let the zombies go away,” he said.

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

He noted the need for specific policy measures but emphasized that market forces should play a greater role, especially for China’s technology development and the yuan.

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

China’s low inflation relative to its trading partners “has led to a depreciation of the real exchange rate, contributing to strong exports and a widening current account surplus,” the IMF said on Wednesday.

This means an increase of 0.3 points according to the IMF report. forecast in october. The organization also increased its 2025 growth forecast by 0.2 points to 5%.

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

China reported early Wednesday that its consumer price index rose 0.7% in November from a year ago, reaching its highest level in nearly two years.

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

Chinese leaders announced in October that development goals for the next five years would include technological self-sufficiency as well as greater efforts to increase consumption. Senior leaders are expected to hold an annual meeting later this week to discuss next year’s economic plans.