On Wednesday, February 18, the International Monetary Fund (IMF) released its annual comprehensive review report on China’s economy for 2025 (also known as the Article IV consultation), listing several serious issues present in the Chinese economy.
The term “external imbalances” appeared for the first time in the 2025 IMF annual report on China and was mentioned 14 times. The executive board members pointed out that China’s growth model is increasingly facing challenges from internal and external imbalances. On one hand, prolonged weak domestic demand may lead to long-term deflationary pressures, while on the other hand, the ability of exports to drive future economic growth may weaken.
The IMF emphasized that nearly one-third of China’s growth in 2025 came from net exports, a reliance that “raises concerns of overcapacity, which could ultimately prompt trading partners to take trade actions and jeopardize China’s exports.”
The report highlighted that the issues in the Chinese economy stem from lukewarm demand in the private sector, with overall inflation persistently weak despite a slight uptick in core inflation. In 2025, the average inflation rate was 0%, while the GDP deflator continued to decline.
Furthermore, as a major export economy, China’s lower inflation level compared to its trading partners has led to a depreciation of the real exchange rate of the renminbi, driving strong exports to some extent and expanding the current account surplus to 3.3% of GDP in 2025. This figure is more than double the 1.5% predicted in the 2024 annual report.
Capital outflows from China accelerated in the second half of 2024. With the U.S.-China reaching a trade ceasefire agreement, China’s capital outflows eased in the second quarter of 2025 but remained significant. Correspondingly, foreign direct investment inflows remained weak.
Below are nine key charts from the IMF report, which can help you gain firsthand understanding of the current state of China’s economy.