China needs to encourage spending, hasten property sector recovery in 2026 – IMF in IMF/OECD News 22/02/2026 China has been urged to move towards a “consumption-led growth” economy as domestic demand remains subdued amid an ailing property sector, the International Monetary Fund (IMF) warned.  China needs to fuel property sector recovery, add social support via govt financing – IMF  Fiscal stimulus, expansionary macro policy required to drive growth  Increased domestic consumption can raise consumption-to-GDP ratio in next five years China, a historically major importer of petrochemicals, is undergoing significant transformation due to massive growth in domestic production capacity, increasing self-sufficiency, and resulting in oversupply in the global market as excess supply from China enters the market while imports are reduced. China’s economy is projected to slow to 4.5% in 2026 from around 5% in 2025, with prolonged tariff effects and trade uncertainty to weigh on growth, the IMF said in a report on 18 February. Strong exports and policy stimulus drove China’s growth in 2025, while inflation averaged 0% last year, and a weak yuan (CNY) increased the current account balance to an estimated 3.3% of GDP in 2025. In 2025, China recorded an annual trade surplus of $1.19 trillion, a 19.9% increase from 2024. “Yet China cannot count on ever higher exports to drive durable growth in the coming years. That makes pivoting to consumption-led growth the overarching policy priority,” IMF executive directors said. For 2026, sluggish recovery in the property sector, as well as high debt levels “could contribute to greater domestic demand weakness, entrenched deflation, and continued reliance on exports”, the IMF said. In the middle term, a declining labour force as well as slower productivity growth and decreasing returns on investment will lead to further growth deceleration, they added. While China’s 15th Five-Year Plan (2026-30) has made increasing consumption a priority for economic growth, authorities “can do more”, the IMF added. The IMF recommended that China pivots away from an export-led economy to more expansionary macroeconomic policies, the chief being fiscal stimulus, “until deflationary pressures subside durably”. Fiscal policy should prioritize strengthening social protection to give more confidence for people to spend, according to the report. “We estimate that granting urban status to 200 million rural migrants could raise the consumption-to-GDP ratio by an additional 0.6 percentage points,” IMF economists said. More support for consumption and the property sector is required to drive spending, alongside further monetary easing and more exchange rate flexibility. The property sector remains in a protracted economic correction as the government sought to deflate a debt-fuelled housing bubble beginning in 2020, leaving numerous houses unsold. More forceful central government financing is needed to help complete unfinished housing projects, which would help restore consumer confidence, the IMF said. While the “anti-involution” strategy to curb excessive price competition is welcomed, IMF directors said the strategy should have further clarification and “be accompanied by stronger incentives to reduce overinvestment by local governments”. “Taken together, the IMF’s policy recommendations would significantly rebalance the economy toward consumption … [boosting] the consumption-to-GDP ratio by about 4 percentage points over five yea