Our economic outlook for China
April 25, 2025
Our outlook for year-end 2025
Around 4%
Economic growth,
year over year
China’s economy started 2025 strong, significantly exceeding expectations, with first-quarter annualized GDP growth of 5.4%. Several factors drove the robust growth, including a tech sector market rally that revived business confidence, the expansion of a consumer-goods trade-in program, front-loading of exports ahead of U.S. tariff imposition, and stronger-than-expected activity in property markets in large cities. Yet we expect growth to falter. Much of the first quarter’s activity is likely to come at the expense of activity later in the year, and we anticipate that exports will decline significantly amid U.S. tariffs. We recently lowered our full-year GDP forecast from around 4.5% to just above 4%, with risks to the downside.
Around 0.5%
Core inflation, year over year
We expect a limited overall inflationary impact from Chinese tariffs on U.S. goods. Although food represents about 30% of China’s Consumer Price Index and the price of imported agricultural products could rise, that would likely be offset by energy and commodities prices pressured lower amid slowing global growth. China’s deflationary environment continued in March, with broad consumer prices falling by 0.1% year over year, a second straight month of decline. Month over month, prices fell by 0.4% in March, following a 0.2% decrease in February. We recently lowered our forecasts for full-year core inflation to around 0.5% and for headline inflation to even lower than that.
1.2%
Monetary policy rate
The strength of economic recovery depends on the magnitude and allocation of policy stimulus. Well-designed implementation of announced measures will matter to ease developers’ burden while flexibly destocking a housing industry overhang. Meanwhile, we expect monetary easing—we foresee a 30-basis-point cut to the policy seven-day reverse repo rate and 50 basis points of cuts to banks’ reserve requirement ratios—to facilitate fiscal expansion.
Around 5%
Unemployment rate
We believe that structural mismatches in labor supply and demand, particularly among younger workers, may not be easily addressed in the near term and could require additional policy support. We foresee the unemployment rate remaining around current levels the rest of the year.
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