Staff Reporter
China’s economic growth is projected to slow to 4.0% in 2025 as the country navigates potential U.S. tariff increases and persistent challenges in its property sector, according to a recent analysis by UBS.
The anticipated tariffs, expected to be announced in the first quarter and implemented gradually starting in the third quarter, could cut China’s GDP growth by more than 150 basis points, primarily due to weaker exports and decreased manufacturing investment, the UBS analysts stated.
Despite ongoing pressures in the property market, UBS anticipates smaller declines in sales and investments compared to previous years.
Recent policy adjustments, such as cuts to mortgage rates and initiatives for urban renovation, have had some positive impact, especially in major cities. However, high inventory levels and weak household sentiment continue to hinder market recovery, with analysts predicting nationwide stabilization won’t occur until 2026.
In light of these ongoing challenges, UBS foresees an increase in fiscal and monetary policy support. The government is expected to unveil new measures during the March National People’s Congress meeting, which may include raising the fiscal deficit target to around 4% of GDP and issuing special government bonds.
UBS also predicts a policy rate cut of 30 to 40 basis points in 2025, with further easing expected in 2026.
Lingering deflationary pressures, with core consumer inflation hovering around 0%, are adding to economic worries in China. UBS projects that the renminbi will depreciate modestly to 7.6 against the U.S. dollar by the end of 2025, influenced by tariff effects and a widening yield spread between the U.S. and China.
UBS notes that there are potential surprises on the horizon, such as stronger-than-expected U.S. economic growth or a quicker recovery in the property market, which could positively impact China’s outlook. However, significant uncertainties regarding global trade and the effectiveness of domestic policies continue to pose challenges for sustained growth.
