China Economic Outlook, December 2025

Summary

Domestic headwinds including housing market crash, overcapacity, weak sentiments take the place of tariff war to be the dominant factors for China’s growth slowdown.

Key points

• Key points:
• After the four rounds of China-US negotiations and the Xi-Trump South Korea meeting, the two countries achieved several Agreements, indicating China-US relations entered into the best time since Trump's second administration.
• After the tariff war shock stabilized, a number of the recent weaker-than-expected activity readings surprised the market to the downside.
• Supply-demand mismatch continues, which means, industrial production still remains momentum and deflation continues.
• We raise our 2025 GDP forecast to 5% from 4.8% previously, which is in line with the authorities’ target, while maintaining 2026 GDP at 4.5%.
• The 15th Five-Year Plan (2026-2030) was recently approved which sketches the blueprint of the economic and social development of the next five years aiming for achieving “socialist modernization” in 2035.

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