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IMF Warns China’s Debt Crisis Looms Amid Deflation

2/20/2026

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Story summary
  • The International Monetary Fund warns that China's government debt is projected to exceed 135% of GDP in 2026 and deflation persists.
  • It estimates policy waste from industrial subsidies at 4% of GDP, higher than EU's 1.5%.
  • The IMF calls for shift to a consumption-led growth model after net exports drove a third of 2025 growth.
  • It warns that export dependence risks trade tensions and calls reforms to boost domestic demand.