2025 China’s Economic and Financial Outlook Snapshot

I. 2024 Economic and Financial Review

In 2024, China’s economy operated stably on the whole, moving in a V-shaped trajectory. In the first three quarters of 2024, economic prosperity weakened quarter by quarter. Since September, a package of pro-economic growth policies have been rolled out, leading to positive changes in many areas. However, the foundation for economic recovery was not solid yet, with foreign demand not strong enough to make up for insufficient domestic demand, the boom of emerging industries far from adequate to offset the drag by traditional industries, and pains in the structural and cyclic economic transformation remaining obvious. Initial estimates put the annual GDP growth at around 5%.

II. 2025 Economic Outlook

In 2025, changes in internal and external policies will be the biggest variable affecting the trends of China’s economy. Internally, the implementation and enhancement of incremental policies will be the key to economic recovery. Externally, the tariff adjustment targeting China to be introduced after Donald Trump takes office may have significant impact on China’s exports. It’s expected that China’s GDP growth will be around 5% in 2025. 

Specifically, there will be five major characteristics.

Characteristic 1: Supported by policies, consumption is expected to recover gradually. In 2025, consumption growth is likely to pick up slightly. First, the consumer goods trade-in policy is expected to further unleash its role. Second, the potential of service consumption is likely to be further unleashed. Third, falling interest rates on existing housing loans will ease the pressure of repayment on residents, improve residents’ cash flows, and unleash certain consumption potential. 

Characteristic 2: The combination of manufacturing and infrastructure investments will contribute greater to economic growth. First, the recovery of domestic demand, combined with further release of the effects of large-scale equipment renewals, will boost increases in both quantity and quality of manufacturing investment. Second, infrastructure investment will grow faster, contributing greater to economic growth. Third, the decline of real estate investment will narrow, but a positive growth is still hard to deliver.

Characteristic 3: Export expansion will face more headwinds, weakening the support for economic growth. In terms of demand, the growth of global trade will be generally stable, but China’s exports to major economies may diverge. In terms of trade environment, global trade protectionism will intensify as a disturbing factor. 

Characteristic 4: Industrial production will grow steadily, with new drivers playing an increasingly important role. The optimization of the supply structure of emerging industries will speed up, with new drivers likely to be further unleashed. On one hand, the only path for emerging industries is high-end, digital and green development, which has the potential to facilitate further growth in the future. On the other hand, the demand for high-end products in some emerging markets will remain robust in 2025, possibly creating new opportunities for the reasonable deployment of production capacities.

Characteristic 5: The imbalance between supply and demand will be gradually eased, driving moderate recovery of commodity prices CPI will rise moderately. The year-on-year decline of PPI will narrow.

III. 2025 Financial Outlook

2025 is the final year of the 14th Five-Year Plan period, as well as a year when our external environment will undergo drastic changes. Despite of the more uncertain external environment, there will also be opportunities arising from changes in domestic expectation, intensified policies, accelerated growth of new drivers of economy and the stabilizing real estate market. 

The growth of money supply and aggregate financing to the real economy is expected to rise steadily, driven by enhanced policies and recovering financing demand. The price-based regulation mechanism of monetary policies will be further completed, with overall interest rates continuing to decline. Falling before rising, the capital market is expected to see a structural slow bull trend. Bond yields will be kept low, and default risk will tend to decrease. Transition finance standards will be accelerated faster, and the national carbon market will usher into a fast track of development. 

IV. Macroeconomic Policy Orientations

Macro policies should actively address external uncertainties and reinforce the internal momentum of economic growth. Fiscal policies may go beyond the 3% deficit limit, intensifying support for areas like innovation and people’s livelihood. Multiple financial policies should be combined to push sustained and steady economic development. Existing real estate policies should be synergized with new ones, to stop further market decline and drive stabilization. Domestic demand policies should be more proactive, integrating a range of measures to promote consumption and stabilize investment. Foreign trade policies should be devised to expand market reach, and improve the resilience of foreign trade enterprises. Industrial policies should focus on creating an enabling environment for new quality productive forces, and reasonably optimizing the layout of production capacity.

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