Washington, July 9 (IANS) China must urgently overhaul its economic growth model by shifting away from exports towards stronger domestic consumption as it grapples with weak demand, slowing productivity and a rapidly ageing population, the International Monetary Fund (IMF) said on Thursday, warning that these structural challenges will weigh on the world’s second-largest economy in the years ahead.

Speaking at the IMF’s regular press briefing, Julie Kozack, Director of the IMF’s Communications Department, said the Fund continues to see significant structural weaknesses in the Chinese economy despite a modest upward revision in this year’s growth forecast.

The IMF’s latest World Economic Outlook update projects China’s growth to slow from 5 per cent in 2025 to 4.6 per cent in 2026. Although the 2026 forecast represents a slight upgrade from the Fund’s April outlook, Kozack stressed that longer-term structural issues remain a major concern.

“We have been emphasising for quite some time in our bilateral work with China, in our Article IVs, that we do see some significant structural challenges facing the Chinese economy,” she said.

According to Kozack, one of the biggest concerns is persistently weak domestic demand.

“These include persistently subdued domestic demand, particularly domestic consumption, and the flip side of that is rising external imbalances,” she said.

She added that the IMF is also concerned about weakening productivity growth and demographic pressures arising from an ageing population.

“We also see in China weakening productivity growth. And finally, China faces demographic headwinds from population ageing,” Kozack said.

The IMF believes the solution lies in fundamentally changing the country’s growth strategy.

“From our perspective, the key priority for China is to transition its growth model from one that is export-led to consumption-led,” Kozack said.

She said such a transition would require “more urgent and more forceful expansionary macroeconomic policies” alongside reforms to reduce exceptionally high household savings.

“It’s going to require reforms to reduce very high levels of household savings, so that households, rather than saving a lot, also consume,” she said.

Kozack also called for continued support for China’s troubled property sector, describing it as another important element of the reform agenda recommended by the IMF.

“So those are some of the reforms that we would recommend, that we have been recommending, for China,” she said.

Her comments came in response to a question on China’s uneven economic recovery despite multiple policy support measures announced by Beijing over the past year.

The IMF has repeatedly argued that stronger household consumption, rather than investment and exports, will be essential if China is to sustain stable long-term growth. Economists have also highlighted that rising debt levels in the property sector and demographic changes are likely to weigh on economic expansion over the coming decade.

China remains the world’s second-largest economy and a major contributor to global growth.

As policymakers seek to stabilise the economy amid slowing domestic demand and external trade challenges, the IMF has consistently urged Beijing to accelerate structural reforms, strengthen consumer confidence and rebalance growth towards domestic consumption to improve long-term economic resilience.

–IANS

lkj/dan