The International Monetary Fund called on China to halve its industrial subsidies, as concerns mount about manufacturing overcapacity in the world’s second-biggest economy.
Beijing has in recent years ramped up exports of manufactured goods, notably EVs and green energy technology, and built up a trade surplus of over $1 trillion. It has led to worry overseas and at home: Policymakers worry that domestic supply gluts are causing damaging price wars and deflation.
The IMF’s China chief proposed that Beijing cut subsidies from 4% of GDP to about 2%, and start to move toward “consumption-led growth,” saying that its industrial policy has enabled tech innovation but that “overall the impact on the economy has been negative” because of resource misallocation.
