China – Green shoots in domestic economy amid new trade war
|We see signs of green shoots in China's housing market and a potential lift in private sector animal spirits following tech breakthroughs and encouraging policy signals.
We look for continued stimulus to give counterweight to the expected US-China trade war this year.
We still look for a weaker CNY against the USD, which will dampen some of the impact from higher tariffs.
Growth is set to remain fragile, though, as it will take time to repair household confidence following years of first covid lockdowns and subsequently a continued housing crisis.
We keep our forecasts unchanged from December looking for GDP to grow 4.7% in 2025 and 4.8% in 2026.
The US-China rivalry is set to intensify with Trump's foreign policy taking stronger aim at China. He is unlikely to cross China's red line on Taiwan, though.
Trump's America First policy may pave the way for a reset of EU-China relations. However, we expect trade tensions to remain due to China's rise as a competitor in many sectors, heavy use of industrial policy and overcapacity issues.
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