International Monetary Fund urges China to speed up reforms as economy slows

By Our Reporter

The International Monetary Fund (IMF) has encouraged China to quicken the pace of its structural reforms as the country faces mounting economic headwinds. According to the IMF, China’s long-standing growth model heavily dependent on debt-fuelled investment and export-driven expansion is losing momentum, making a transition toward stronger domestic consumption essential for future stability.

A Call for a Shift in Strategy

The IMF warned that China’s current approach, which relies heavily on lending and large-scale infrastructure projects, is becoming less effective. Rising debt levels, a cooling property market, and weakening global demand for Chinese exports are adding pressure to Asia's largest economy.

To maintain steady growth, the IMF recommends that China strengthen internal demand by boosting household consumption. This includes improving social safety nets, increasing income support, and reducing the public’s reliance on savings for healthcare, housing, and education.

Economic Pressure Continues to Build

China has experienced a series of challenges in recent years, including slower industrial output, declining foreign investment, and a prolonged real-estate downturn. The IMF noted that these issues reflect deeper structural problems that need urgent attention. Without reforms, China could face widening economic imbalances and reduced growth potential over the next decade.

What the IMF Wants China to Fix

The fund highlighted several key areas where China should focus its reforms:

• Reduce dependence on debt-led investment, especially within the property and infrastructure sectors.

• Strengthen consumption by supporting household income and reducing inequality.

• Improve market openness to attract more private and foreign investment.

• Enhance regulatory transparency to boost investor confidence.

• Revive innovation and productivity growth, which have slowed in recent years.

Global Impact of China’s Economic Slowdown

A decelerating Chinese economy has implications far beyond its borders. Countries that rely on exporting raw materials to China such as Australia, Brazil, and several African nations could feel the effects of weakened demand. Global manufacturing and supply chains are also sensitive to shifts in China’s economic performance.

International financial markets continue to monitor developments closely, as prolonged weakness in China could influence global inflation, trade flows, and investment trends.

Looking Ahead

The IMF acknowledges that China has already taken steps to stabilize key sectors, but it stresses that deeper reforms are needed to secure sustainable growth. The shift toward a consumption-driven economy will not only support China’s long-term development but also help reduce economic vulnerabilities that have built up over the past decade.