Insight: Beijing’s policymakers have reaffirmed a GDP growth target of ‘at least 5% for 2025 despite facing domestic and external challenges. The government has signalled a mix of loose monetary and fiscal policy to support this goal and stabilize the property and stock markets in the near term. While domestic policy will shift to supporting consumption, the expected increase in U.S. tariffs on Chinese goods means exports face significant headwinds: analysts predict the tariffs may reduce China's GDP by up to 0.7 percentage points in 2025. A weakening yuan may offset some of that but poses a risk of capital outflows.
Impact: 2025 will be a year of flux for China’ economy as it contends with a sluggish property market, high local government debt, and weak consumer confidence. Although the government has implemented a series of stimulus measures aimed at revitalizing domestic demand – which it has finally recognized as the country’s top priority -- questions linger about their effectiveness and scale. In addition, higher tariffs and tensions with the U.S., could complicate China’s recovery and lead to global volatility. One silver lining is that China’s focus on consumption-driven growth may create opportunities for foreign investors in sectors such as technology and green energy.
