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The IMF raised its forecast for China’s economic growth this year but warned that the Chinese government needs to “roll back” industrial policies that could affect trading partners and step up efforts to boost domestic demand.
IMF staff said they had completed their regular assessment of the health of the Chinese economy and raised their forecast for gross domestic product (GDP) growth to 5% from 4.6% for 2024. The multilateral lending agency also raised its forecast for 2025 to 4.5% from 4.1%.
The IMF said the change was due to stronger growth in the first quarter and recent policy measures, with the Chinese government stepping up stimulus measures to support an economy still reeling from the effects of a severe real estate slump.
But the IMF reiterated its calls for China to restructure its economy away from inefficient industrial policies that support “priority sectors” and toward one that prioritizes domestic consumption. Beijing’s own growth target for 2024 is about 5 percent, the same as last year and the lowest in decades.
The comments come amid growing concern among China’s trading partners that China’s industrial policies are creating overcapacity in sectors such as autos and renewable energy.
“Key priorities include rebalancing the economy towards consumption by strengthening social protection nets and liberalizing the services sector to enhance growth potential and create jobs,” the IMF said.
“China’s use of industrial policies to support priority sectors can lead to a misallocation of domestic resources with implications for trading partners. Streamlining these policies and removing trade and investment restrictions would increase domestic productivity and ease decoupling pressures.”
The IMF staff’s “Article IV” discussions came as Chinese President Xi Jinping has emphasized “new productive forces” to drive growth, leading to heavy investment in advanced industries such as renewable energy, electric vehicles and semiconductors.
The United States, worried that a wave of low-cost imports from China could devastate its own auto industry, has imposed higher tariffs on Chinese-made EVs, and the European Union is also due to soon conclude an investigation into anti-subsidies to the industry.
China denies allegations of overcapacity and subsidies in the renewable energy industry and accuses the United States of trying to use trade to stifle China’s development and the EU of protectionism.
