Facing the continued uncertainty of the tariff war, IMF (International Monetary Fund) Chief Kristalina Georgieva recently stated that the IMF has been actively promoting its policy recommendations to China, urging the country to shift away from an export-oriented economic growth model. At the same time, due to the strong "demand shock" brought by increased tariffs, China is likely to face deflation, while the U.S. will see a rise in inflation due to tariffs.
Foreign media reported that at the Milken Institute Global Conference in Los Angeles, when asked whether the IMF needs to take a tougher stance on China following U.S. Treasury Secretary Janet Yellen’s request for the organization to return to its core mission of economic stability, Georgieva stated: “We (the IMF) have always done so.”
Georgieva emphasized that the IMF has repeatedly pointed out that China must address four issues affecting its domestic and international economy. First, move from an export-oriented economy to a model more reliant on consumption. Second, address issues in the real estate sector. Meanwhile, Beijing also needs to embrace the service industry as an important driving force for economic growth and reduce the government's role in the economy.
Georgieva also acknowledged that in the short term, the Chinese government’s degree of economic intervention is unlikely to be significantly reduced.
Additionally, the Russian news agency Sputnik reported that Georgieva also mentioned that due to U.S. President Trump’s imposition of tariffs, demand for Chinese exports from the U.S. will drop sharply, putting China under deflationary pressure, while European demand will also decrease, which may alleviate inflation. “China is likely to face deflation because the demand shock is very strong.” Meanwhile, developed economies like the U.S. facing a large-scale supply crisis, coupled with persistent demand, will encounter supply shocks, increasing inflationary pressures and pushing up prices.
U.S. Federal Reserve Chairman Jerome Powell previously stated that U.S. tariffs are higher than expected, which will lead to rising inflation and slower economic growth. However, Trump believes that the U.S. has almost no inflation, and the possible reason for economic slowdown is the Federal Reserve Chair's reluctance to lower interest rates.
During the IMF and World Bank Spring Meetings held last month, Yellen said that these two international institutions should return to their core missions, namely economic stability and development, rather than overly involving themselves in topics like climate change, gender, and equality. She also urged the IMF to be a "truth-teller who doesn’t hold back,” and suggested the IMF should "call out countries like China that have long implemented policies distorting the global economy and engage in opaque currency practices.”