China's economic growth is likely to slow to 4.5% in 2025 and cool further to 4.2% in 2026, a Reuters poll showed, with policymakers poised to roll out fresh stimulus measures to soften the blow from impending US tariff hikes.
Gross domestic product (GDP) likely grew 4.9% in 2024 - largely meeting the government's annual growth target of around 5%, helped by stimulus measures and strong exports, according to the median forecasts of 64 economists polled by Reuters.
But the world's second-largest economy faces heightened trade tensions with the United States as President-elect Donald Trump, who has proposed hefty tariffs on Chinese goods, is set to return to the White House next week.
“Potential US tariff hikes are the biggest headwind for China's growth this year, and could affect exports, corporate capex and household consumption,” analysts at UBS said in a note.
“We (also) foresee property activity continuing to fall in 2025, though with a smaller drag on growth.”
Growth likely improved to 5.0% in the fourth quarter from a year earlier, quickening from the third-quarter's 4.6% pace as a flurry of support measures began to kick in, the poll showed.
On a quarterly basis, the economy is forecast to grow 1.6% in the fourth quarter, compared with 0.9% in July-September, the poll showed.
The government is due to release fourth-quarter and full-year GDP data, along with December activity data, on Friday.
China's economy has struggled for traction since a post-pandemic rebound quickly fizzled out, with a protracted property crisis, weak demand and high local government debt levels weighing heavily on activity, souring both business and consumer confidence.
Policymakers have unveiled a blitz of stimulus measures since September, including cuts in interest rates and banks' reserve requirements ratios (RRR) and a 10 trillion yuan ($1.36 trillion) municipal debt package.
They have also expanded a trade-in scheme for consumer goods such as appliances and autos, helping to revive retail sales.
Analysts expect more stimulus to be rolled out this year, but say the scope and size of China's moves may depend on how quickly and aggressively Trump implements tariffs or other punitive measures.
More stimulus on the cards
At an agenda-setting meeting in December, Chinese leaders pledged to increase the budget deficit, issue more debt and loosen monetary policy to support economic growth in 2025.
Leaders have agreed to maintain an annual growth target of around 5% for this year, backed by a record high budget deficit ratio of 4% and 3 trillion yuan in special treasury bonds, Reuters has reported, citing sources.
The government is expected to unveil growth targets and stimulus plans during the annual parliament meeting in March.
Faced with mounting economic risks and deflationary pressures, top leaders in December ditched their 14-year-old “prudent” monetary policy stance for a “moderately loose” posture.
China's central bank is expected to deploy its most aggressive monetary tactics in a decade this year as it tries to revive the economy, but in doing so it risks quickly exhausting its firepower. It has already had to repeatedly shore up its defense of the yuan currency as downward pressure pushes it to 16-month lows.
Analysts polled by Reuters expected the central bank to cut the seven-day reverse repo rate, its key policy rate, by 10 basis points in the first quarter, leading to a same cut in the one-year loan prime rate (LPR) - the benchmark lending rate.
The PBOC may also cut the weighted average reserve requirement ratio (RRR) for banks by at least 25 basis points in the first quarter, the poll showed, after two cuts in 2024.
Consumer inflation will likely pick up to 0.8% in 2025 from 0.2% in 2024, and rise further to 1.4% in 2026, the poll showed.
