China Economic Outlook, March 2025

Summary

Amid the China-US trade war, we still raised our China 2025 and 2026 GDP forecast due to the jumbo size stimulus package, the new growth engine high-end manufacturing to support growth and lower-than-expected tariff imposed.

Key points

• Key points:
• We raise our China GDP forecast in 2025 to 4.5% from previous 4.1%, and 2026 GDP to 4.2% from 4% previously and explain four reasons for our adjustment.
• We also explain what could go wrong with China’s jumbo size stimulus package, such as Insufficient Size of Fiscal Stimulus Measures, Inefficient Allocation of Stimulus Funds, Slow pace of Policy Implementations, lack of Incentives for Bureaucrats’ Implementation, counterproductive market communication etc.
• China’s real estate market remains the primary risk, housing price rebounded marginally but not for other housing indicators.
• China-US rate reversion reached historical high due to China-US unsynchronized monetary policy, which significantly impacts our Chinese corporate financing business.
• March 2025 "two sessions" set the 2025 growth target at around 5% and expanded the fiscal deficit budget to 4% from the red line of 3% previously.

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