China Economic Outlook. June 2026

Summary

Chinese economy is domestic driven and Iran war’ impact on China’s economic growth and inflation has been limited compared with other Asian economies.

Key points

• Key points:
• Economic wise, “strong supply and weak demand” continue. From supply side, China is transferring from manufacturing factory to manufacturing power. From demand side, sluggish retail sales is due to fading effect of national subsidies, while weak FAI is mainly due to housing market crash and deleveraging campaign.
• We maintain our 2026 GDP forecast at 4.5% which is in line with the authorities’ 4.5-5% growth target announced in March “two sessions” and we also maintain 2027 GDP forecast at 4.2%.
• We raise our CPI forecast to 1.2% and PPI to 1.4% for 2026.
• We predict there will be no rate cut or RRR cut in the rest of the year amid the PBoC’s ”wait-and-see” attitude, similar to other main central banks.
• Geopolitical risks have eased, partially due to Trump’s China visit.

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