By Brian Spegele
BEIJING -- The head of the International Monetary Fund warned China that its dominance over manufacturing risks exacerbating global trade tensions, urging Beijing to take far greater action to shift its economy toward domestic consumption.
"As the second largest economy in the world, China is simply too big to generate much growth from exports," said IMF Managing Director Kristalina Georgieva on Wednesday. Changes to its model are "now long overdue" and should be accelerated, she added.
Georgieva's pointed remarks in Beijing, part of an annual assessment by the IMF of China's economy, came just days after the Chinese government disclosed that its trade surplus in goods topped $1 trillion for the first time, a milestone in economic history that has underscored the extent of its manufacturing dominance.
In a country where the sophistication and speed of its factories are a point of pride, Beijing has tended to brush off criticism of its export-driven model, instead presenting itself as a victim of unjust protectionism by the U.S. and others, and as a defender of open markets.
But as China's exports have surged to record highs, Beijing's defense has increasingly fallen on deaf ears internationally, with some European nations joining the U.S. in their criticism of China's tactics.
China's exports, rising 5.4% in the first 11 months of the year compared with the same period a year earlier, have proven to be a bright spot in an economy that is beset by challenges. They include a persistently weak property market, high youth unemployment and lofty government debt levels.
Depressed real-estate prices, coupled with a preference, especially among older Chinese, to save for rainy days, have held back domestic consumption this year. At one point, Georgieva made a plea to the many young Chinese journalists in attendance to get their families to buy more.
"China counts on you to be the driver of domestic demand," Georgieva said. "You need to help your mothers, fathers, grandmothers, grandfathers to change their attitude toward one that says it's patriotic to spend money and lift China's domestic consumption rate."
The country's economic challenges mean growth in its gross domestic product is likely to slow to around 4.5% in 2026, according to the IMF, from around 5% this year. In a positive sign for China, the IMF revised next year's forecast upward by 0.3 percentage points from an earlier projection due to what it said were lower-than-expected tariffs and the impact of government stimulus.
The scale of China's exports isn't only a challenge for rich countries like the U.S. and in Europe, but is also hitting Africa, Southeast Asia and Latin America, where Chinese shipments are increasingly being redirected.
Chinese companies have been busy this year deploying advanced robotics and artificial intelligence at factories across the country, as part of efforts to shore up China's manufacturing dominance for the long haul. Despite trade tensions and President Trump's pledge to bring more manufacturing back to the U.S., many economists believe that China's share of global good exports will continue to grow in the years ahead.
Strengthening the social safety net to give Chinese more confidence to go out and spend was one of several recommendations by the IMF on Wednesday, alongside increasing social spending in rural areas and scaling back government industrial policies.
Such recommendations are no surprise to Chinese officials accustomed to similar calls from Western economists. Yet leader Xi Jinping has been lukewarm on undertaking such drastic change, instead preferring to focus on high-end manufacturing and transforming China into a technological powerhouse, while taking steps at the margins to encourage greater consumption.
Poor relations with the U.S. have only hardened China's resolve to become self-reliant in critical technologies from semiconductors to automobiles. But the vast sums of money that the government has poured into achieving its goals have contributed to huge waste, hurting productivity growth and forcing companies such as electric-car makers to export more.
Georgieva said authorities in China recognize the challenges that the economy faces today, and have begun taking steps in the right direction.
"We are encouraging them to move more forcefully and with greater urgency," she said.
Write to Brian Spegele at Brian.Spegele@wsj.com
(END) Dow Jones Newswires
December 10, 2025 06:46 ET (11:46 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
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