China's Economy on Track to Hit Growth Target, New IMF Forecast Suggests

By Jiahui Huang

China's economy will likely hit officials' growth target for this year, an upgraded forecast from the IMF suggests, coming as exports show resilience despite the weight of U.S. tariffs.

The stimulus rolled out by Beijing and a trade truce with the U.S. that has temporarily dialed back tensions has brightened the outlook for the world's second-largest economy, the International Monetary Fund said Wednesday.

It now expects China's economy to expand 5% this year. That is up from the 4.8% forecast in October, and in line with Chinese policymakers' target of around 5% growth.

Momentum will slow to 4.5% next year, but that too is better the 4.2% growth the IMF had projected previously.

China's economy has fared better than many had feared earlier in the year, with recent data showing solid exports growth though shipments to the U.S. remain in contraction. After the Trump administration announced sweeping tariffs in April, sparking a wave of tit-for-tat measures between Washington and Beijing, many forecasters had expected China's economy to take a critical hit.

Now the pendulum is cautiously swinging the other way.

The detente reached in October de-escalated tensions with the U.S., adding some clarity to China's outlook. Multiple brokerages and organizations are becoming more positive on the economy's prospects.

The Asian Development Bank also raised its 2025 view for China, citing surprisingly solid exports, better-than-expected growth in the first three quarters and new policy support, even as domestic demand remained subdued.

The IMF's upgrade comes after a 10-day visit to Beijing and Shanghai by a team of experts at the fund who met with the central bank, private-sector representatives and government officials.

However, the economy remains significantly imbalanced, the fund said, noting sluggish domestic demand and deflationary pressures.

"The key policy priority for China is to transition to a consumption-led growth model, away from an overreliance on exports and investment," said Sonali Jain-Chandra, the IMF's mission chief for China.

That echoes calls economists have long made for the economy to pivot toward one powered by consumer demand and not just manufacturing prowess. Chinese policymakers have repeatedly vowed to give consumption a bigger role in driving economic growth, but little sustainable progress has been made.

In its Wednesday report, the IMF suggested the China roll out a more forceful policy package--with greater urgency.

Though exports have outperformed expectations, China continues to face challenges from the property sector downturn--which is sapping household and business confidence--and slowing productivity. A sharp contraction in investment has raised alarm bells too.

The IMF advised China to consider deploying more expansionary macroeconomic policies to get households to spend more.

If China can address the challenges it has in consumption, local government debt and a shrinking labor force, could add about 2.5 percentage points to growth by 2030, the fund said.

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

December 10, 2025 04:59 ET (09:59 GMT)