BY DAVID LAWDER
WASHINGTON – International Monetary Fund Managing Director Kristalina Georgieva on Monday said the IMF has been vocal about its policy prescriptions for China to move away from an export-led growth model.
Asked at the Milken Institute Global conference in the Los Angeles area whether the IMF needed to get tougher on China as a result of US Treasury Secretary Scott Bessent’s directive for the Fund to get back to its core economic stability mission, Georgieva said the Fund has been “doing exactly that.”
“For quite some time, we have been vocal that China has to deal with four problems that affect it domestically and affect it internationally. One, shift from export to more consumption. Two, fix the property sector,” she said, adding that Beijing also needed to embrace the services sector for growth and reduce the state’s role in the economy.
She acknowledged the Chinese state footprint was unlikely to shrink much in the near term.
During IMF and World Bank Spring Meetings last month, Bessent said that the two institutions needed to get back to their core economic stability and development missions after straying too far into climate, gender and equality issues.
He also called on the IMF to be a “brutal truth teller” and said it should “call out countries like China that have pursued globally distortive policies and opaque currency practices for many decades.”
Georgieva said that China would face deflationary pressures from a steep falloff of US demand for its exports because of President Donald Trump’s tariffs, while Europe also would see less demand, which could moderate inflation. The US, meanwhile would face a supply shock that would add inflationary pressures, she added.
China’s first-quarter economic growth outstripped expectations, underpinned by solid consumption and industrial output, but analysts fear momentum could shift sharply lower as US tariffs pose the biggest risk to the Asian powerhouse in decades.
President Donald Trump has ratcheted up tariffs on Chinese goods to eye-watering levels, prompting Beijing to slap retaliatory duties on US imports that have raised the stakes for the world’s two biggest economies and rattled financial markets.
Data on Wednesday showed China’s gross domestic product (GDP) grew 5.4 percent in the January-March quarter from a year earlier, unchanged from the fourth quarter, but surpassed analysts’ expectations in a Reuters poll for a rise of 5.1 percent.
Growth momentum is expected to cool sharply in the next few quarters, however, as Washington’s tariff shock hits the crucial export engine, heaping pressure on Chinese leaders to roll out more support measures to keep the world’s second-largest economy on an even keel.
While government stimulus boosted consumption and supported investment, Xu Tianchen, senior economist at the Economist Intelligence Unit, said that “a forceful and timely policy response” is needed given the additional pressure stemming from US tariffs.
