The Chinese economy has remained solid this year so far despite the ongoing trade disputes, mainly with the United States. However, structural factors will increasingly weigh on economic growth. Recently, the economy has expanded at moderate rates. In the third quarter of 2025, it grew 4.8% year on year. On a seasonally-adjusted quarter-on-quarter basis, GDP growth was 1.1%, slightly higher than the expansion of 1.0% in the second quarter.
Exports continue to grow solidly despite turbulent tariff policies and negotiations with the United States. Industrial output was also strong, mainly driven by exports. Domestic demand, however, is weak and is likely to stay so. The problems in the real estate sector and high public and private debt dampen consumption. House prices, sales, and building activity have all remained depressed. At the same time, however, China has developed an advanced position in a number of industries such as artificial intelligence, electric vehicles, and solar panels. In the coming quarters, we expect somewhat lower economic growth as exports will be less dynamic and domestic demand will remain weak. Policymakers can be expected to continue to use modest fiscal stimulus measures to dampen the path towards lower GDP growth rates. The People’s Bank of China is expected to continue to cut interest rates against the backdrop of low inflation and weak domestic demand.
Overall, we think that the Chinese economy will expand by 4.9% in 2025, followed by somewhat lower growth rates in 2026 and 2027 (4.1% and 3.9%). Inflation will remain low.
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