IMF Urges China to Migrate Growth Model towards Consumption

IMF Managing Director Kristalina Georgieva plans to tell China to boost weak domestic consumption, address its troubled real estate sector, and rein in local government debt, all of which are weighing on both Chinese and global growth, according to Reuters

Georgieva stated that the messages will be delivered to Chinese authorities in a forthcoming IMF "Article IV" review of China's economic policies. According to her, the Fund will strongly encourage Beijing to shift its growth model away from debt-fueled infrastructure investment and real estate.

"Our advice to China is to use your policy space in a way that helps you shift your growth model towards more domestic consumption," Georgieva said. "Because in this current environment, the traditional way of infrastructure, pumping in more money, is not going to be productive."

China's ageing population and falling productivity, as well as companies in the United States and Europe shifting supply chains away from China, were "suppressing" its growth rate. According to Georgieva, China's real estate problems have caused consumers to cut back on spending.

"We actually project that without structural reforms, China's medium-term growth could fall below 4%," Georgieva said.