China’s Growth Outlook Brightens as IMF raises growth forecast to 5% for 2025

The IMF forecasts China will grow 5 percent in 2025 and 4.5 percent in 2026, citing stimulus and resilience despite trade tensions. It warns of property‑sector weaknesses, weak demand, and deflation risks, urging a shift toward consumption‑led growth and deeper reforms. Beijing has introduced supportive measures, while Premier Li calls for openness and avoiding politicised trade.

China is expected to maintain steady economic momentum next year, with the International Monetary Fund forecasting a 5 percent expansion in 2025 followed by a gradual slowdown to 4.5 percent in 2026. The updated projections, released Wednesday, reflect a slightly more optimistic assessment of the country’s growth prospects despite ongoing global trade tensions.

In its annual review, the IMF upgraded China’s near‑term outlook by 0.2 and 0.3 percentage points compared with its October estimates. The fund cited a combination of new government stimulus measures and softer‑than‑anticipated foreign tariffs as key factors bolstering the world’s second‑largest economy.

Sonali Jain‑Chandra, the IMF’s mission chief for China, noted that while the economy has demonstrated “remarkable resilience” in the face of repeated shocks, significant structural headwinds remain. Persistent pressures from a prolonged property‑sector correction, strained local government finances, sluggish consumer confidence, and deflationary risks continue to weigh on the broader outlook.

According to Jain‑Chandra, China’s heavy dependence on external demand is becoming less sustainable as global trade frictions intensify. She urged policymakers to accelerate the country’s shift toward consumption‑driven growth and reduce reliance on investment and exports. The call comes as China’s trade surplus soared past US$1 trillion in the first 11 months of the year, setting a new record.

To support a more balanced and durable expansion, the IMF recommended a stronger policy response, including more assertive macroeconomic support and reforms aimed at reducing high household savings rates. Additional priorities outlined by the fund include expanding social safety nets, facilitating the adjustment in the property market, and restoring consumer confidence.

Recent moves by Beijing suggest growing awareness of these challenges. The government has introduced a mix of fiscal stimulus, monetary easing, and targeted efforts to bolster household spending. Measures to stabilise the real estate market and curb intense price‑cutting competition in certain industries have also been rolled out.

Beyond immediate support, the IMF called for deeper structural reforms. These include strengthening fiscal and financial frameworks, cleaning up balance‑sheet risks, improving the flow of goods and services across regions, ensuring fair competition among firms, opening more areas of the services sector, and implementing labour‑market policies to ease unemployment.

The release of the IMF’s assessment coincided with high‑level economic discussions in Beijing. On Tuesday, Premier Li Qiang met with leaders of major international economic institutions, including IMF Managing Director Kristalina Georgieva, urging expanded mutual market access and warning against the politicisation of trade. Li reaffirmed China’s confidence in achieving its roughly 5 percent growth target for the year, pointing to steady progress despite ongoing headwinds.

Overall, the IMF’s latest outlook paints a picture of an economy that continues to hold firm but will require decisive action and structural shifts to navigate emerging challenges and sustain growth in the years ahead.