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We forecast China’s GDP growth to slow only marginally in 2026–27, before gradually accelerating as productivity gains take hold. By 2028–29, we expect the housing downturn to bottom, removing a key drag on demand.
In 2026, we believe both exports and consumption are likely to outperform the soft consensus expectations. New subsidies mitigate the payback from earlier consumption frontloading, while Chinese exporters continue to gain market share in the Global South. Despite efforts to curb excess capacity, we expect investment to rise, as policy prioritizes self-reliance.
China enters the 2026-2030 period with a trade truce and solid policy buffers China remains in a cyclical downturn dragged down by a deflating property sector. Yet it enters the 2026–30 period with US–China relations relatively stable. Reported GDP growth reached 5.0% Y/Y in 2025, in line with the official target, while nominal growth was weaker at around 3.8% Y/Y, reflecting persistent deflation despite efforts to curb destructive price competition.
We expect the 2026 growth target to remain set at “around 5%” in March.
Despite continued headwinds from property and some potential payback after export and consumption frontloading in 2025, we see limited downside risk in the near term, with policy increasingly acting as a backstop. Policy buffers are substantial. Fiscal support has largely been kept in reserve, while monetary easing has been measured. Despite core inflation lingering at 1% Y/Y, the People’s Bank of China (PBOC) delivered only a 10bp cut to policy rates bringing the 7day repo rate to 1.40% and a 50bp reduction in reserve requirement ratios during 2025.
Effective 19 January, the PBOC initiated targeted easing measures, cutting re-lending rates and increasing the quotas, signalling more precision easing instead of broad headline cuts.
Growth is likely to remain below 5% Y/Y, but its composition is improving: less construction driven and more productivity-led. Toward the end of the decade, assuming progress on social security reform and industrial upgrading, domestic consumption should play a larger role.