IMF urges China to pivot from export-led growth to domestic consumption
Article IV flags real RMB depreciation and current-account surplus, global tariff-and-subsidy spiral gets IMF blessing
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The International Monetary Fund has delivered a warning to Beijing that is less about macroeconomics than about geopolitical consequences: stop trying to export your way out of trouble, or the rest of the world will respond with tariffs, subsidies, and industrial policy of its own.
In its annual Article IV consultation on China, the IMF’s executive directors argue that “transitioning to a consumption-led growth model should be the overarching priority,” according to a statement cited by The Japan Times, which republished Bloomberg reporting. The fund faults China’s policies for generating “waste at home and damage abroad,” pointing to a large current-account surplus with “adverse spillovers” to trading partners.
The IMF’s staff also highlights what it calls a “real depreciation of the RMB”—an inflation-adjusted weakening of the renminbi—that effectively boosts exports. The IMF is accusing China of running an export machine with a currency tailwind while domestic demand remains weak.
The subtext is that China’s internal imbalances are now being treated as a legitimate trigger for external retaliation. For decades, institutions like the IMF positioned themselves as referees of open markets. Now the fund is effectively describing the conditions under which other governments will feel justified in building walls.
What does “rebalancing” mean in practice? It means shifting income toward households, reducing the economy’s dependence on investment and manufacturing, and shrinking the surplus. But the IMF’s diagnosis implicitly points to a politically awkward prerequisite: someone has to eat the losses embedded in China’s property sector and local-government balance sheets.
A consumption-led model is hard to square with a system where households are expected to save aggressively because the social safety net is thin, real estate is the primary store of wealth, and local governments rely on land sales. If Beijing is serious about boosting consumption, it will likely have to move liabilities upward—through fiscal transfers, bank recapitalizations, and quasi-bailouts—so households can spend rather than hoard.
The IMF is asking China to become less mercantilist and more domestically balanced, while simultaneously normalizing the idea that global trade will be “rebalanced” through politics if Beijing refuses. It’s a message to China, but also a permission slip to everyone else: if China won’t adjust voluntarily, then tariffs and subsidies are simply the new adjustment mechanism.
The IMF may be right on the economics. But when the world’s chief anti-crisis institution starts warning about “spillovers” as a prelude to trade retaliation, something else is being institutionalized: not free trade, but managed conflict—administered by the same governments that created the imbalances in the first place.