China Economic Outlook, September 2025

Summary

As the trade war shock has faded, the recent data surprised the market to the downside as domestic risks take the place of external shock to become the main drag on growth in China.

Key points

• Key points:
• The China-US trade war could be viewed as almost settled after four rounds of agreements. But other conflicts in tech war and finance war are set to continue.
• After the tariff war shock stabilized, a number of weaker-than-expected July activity readings surprised the market to the downside.
• Domestic headwinds including housing market crash, overcapacity, weak consumption caused by weak employment and income expectations etc. still remain the dominant factors for growth slowdown.
• We maintain our 2025 GDP forecast at 4.8% and 2026 at 4.5%. As 1H 2025 already reached 5.3%, the authorities have enough maneuvering room to achieve 5% growth target.
• The draft of 15th Five-Year Plan (2026-2030) is to be released in the Q4 2025, which will sketch the blueprint of the economic and social development of the next five years aiming for achieving “socialist modernization” in 2035.

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