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The head of the International Monetary Fund has urged China To correct its economic imbalance, saying that the country of 1.4 billion people is too big to depend on exports for its growth.
China’s global exports are rising while exports to the United States have declined after Pres. donald trump Increased taxes on imports from China and many other countries. Earlier this week, Beijing Its trade surplus for 2025 is already reported to exceed a record $1 trillion.
International Monetary Fund Managing Director Kristalina Georgieva China’s heavy reliance on exports risks its trading partners taking further steps to curb imports from China, it said.
“(China’s) continued reliance on export-led growth risks escalating global trade tensions,” Georgieva said at a news conference on Wednesday. “China is now too big to rely on exports as a source of growth… and (it has) a large domestic market that can aspire to great growth in the coming years.”
At a high-level meeting in October aimed at drawing up plans for the next five years, China’s leaders highlighted the need to boost domestic consumption. The ruling Communist Party has long sought to shift the economy away from heavy reliance on exports and massive investment in infrastructure.
But the prolonged recession in the real estate market as well as the COVID-19 pandemic intervened, which has slowed the activity of this once powerful engine for growth. Meanwhile, Beijing has worked hard to expand manufacturing in high-tech industries, struggling to rein in overcapacity in some sectors such as automaking.
Morgan Stanley recently predicted that by 2030, China’s market share in global exports could reach 16.5%, up from about 15% currently, supported by its advanced manufacturing and high-growth segments such as robotics, electric vehicles and batteries.
Georgieva was visiting Beijing for an annual economic forum involving the heads of major international organizations. The IMF was also concluding its annual review of China.
Weak domestic consumption and demand in China have contributed to the yuan weakening against the dollar and other currencies. Due to this, China’s exports have become cheaper than other countries, due to which the trade imbalance has increased.
The IMF said comprehensive policies are needed to encourage Chinese people to spend more.
While China’s market is huge and still growing at about a 5% annual pace, domestic demand has weakened as consumers cut back spending due to job and income losses during and after the pandemic.
The years-long property slump has also hit domestic wealth, reducing buyers’ willingness to spend and reducing demand for imports, leading to a widening trade imbalance.
Helping offset the decline in exports to the US, China is selling more to other countries in Africa, Latin America, Southeast Asia and Europe. This has increased complaints from China’s trading partners as its imports have failed to keep pace.
On Wednesday, the EU Chamber of Commerce in China also warned that its substantial trade surplus was raising concerns.
The IMF’s comments follow Chinese Premier Li Keqiang’s remarks to an international group of financial experts on Tuesday in which he said the higher tariffs had dealt a “severe blow” to the global economy.