China's Economic Growth to Decelerate in 2025, Says Economists

Economists predict that China's GDP growth will decelerate to 4.4% in 2025, according to a survey conducted by Nikkei Asia. The forecast reflects downward revisions from September, citing uncertainty stemming from US President-elect Donald Trump's imposition of tariffs and ongoing turmoil in China's property market.

The 27 analysts surveyed by Nikkei Asia revised their GDP forecast for 2025 to 4.4%, representing a 0.1 percentage point decline from the previous prediction. The outlook for 2026 also indicates a downward trend, with economists anticipating GDP growth of 4.1%.

For 2024, economists expect China's GDP to expand by 4.9%, aligning with Beijing's official target of "around 5%." The projected growth for the final quarter of 2024 is 1.6%, signaling an uptick from the previous quarter's 0.9% growth. Economists attribute this improvement to Beijing's proactive policy support measures implemented in September.

"Recent signals of more policy support have encouraged additional activity in Q4 leading to an upward revision," notes Chris Kushlis, chief emerging markets macro strategist at T. Rowe Price, predicting a robust 1.7% quarter-on-quarter growth for the fourth quarter.

However, the looming threat of tariffs from the US under President-elect Trump casts a shadow over the near-term outlook. Trump's proposed tariffs, potentially reaching 60%, pose a significant risk to China's export-driven economy, especially given weakening domestic spending.

Francoise Huang, senior economist for Asia-Pacific at Allianz Trade, states that the tariffs are expected to be implemented in the second quarter of 2025, with the full impact on shipments likely to materialize in the latter half of the year. "The first half of the year is likely to be characterized by frontloading of trade between the US and China - a phenomenon already currently apparent," Huang said.

The potential impact of these tariffs is expected to extend into 2026. Jacqueline Rong, chief China economist at BNP Paribas, estimates that 60% tariffs could reduce China's GDP growth by 0.4 percentage points in 2025 and 0.8 percentage points in 2026.

Despite the looming uncertainties, some economists remain optimistic. Kenny Ng, securities strategist at Everbright Securities International, expects China to achieve 4.9% growth in 2025, citing Beijing's ongoing efforts to stabilize the property and financial markets.

However, others express more cautious sentiments. Wang Tao, UBS chief China economist, forecasts a slower GDP growth of 4.0% in 2025, warning that US tariff hikes will likely further strain the property market.

J.P. Morgan Chief China Economist Haibin Zhu offers the most pessimistic outlook, predicting a mere 3.9% GDP growth in 2025. Zhu warns that the tariff hike could negatively impact growth by nearly 2 percentage points, prompting potential retaliatory measures from Beijing.

Beyond the tariff threat, China continues to grapple with a protracted housing crisis, characterized by declining home sales, prices, construction, and investment. This trend is expected to persist into 2025.

"The large stock of unsold housing means that it will take time for the property market to stabilize," observes Louis Kuijs, Asia-Pacific chief economist at S&P Global Ratings.

The anticipated tariffs and a less aggressive Federal Reserve rate-cutting cycle have fueled expectations of a weaker yuan. Economists predict the currency will depreciate to 7.37 yuan per dollar by the end of 2025 and 7.33 yuan by the end of 2026.

Economists anticipate broader stimulus measures in 2025, including government bond issuance to support income assistance, consumption subsidies, initiatives aimed at boosting the birth rate, and urban infrastructure development. However, concerns remain regarding the effectiveness of these measures given the slow pace of housing destocking and the sluggish labor market recovery.

"The size of that support remains unclear," says Wei Yao, chief Asia and China economist at Societe Generale.