China’s Economic Growth Forecasted at 4.7% in 2025, Supported by Policy Stimulus

The Chinese authorities are prioritizing national strategic projects and advanced manufacturing, alongside promoting technological innovation.

The economy of the People’s Republic of China (PRC) is projected to grow at a rate of 4.7% in 2025, according to the latest Asian Development Outlook released by the Asian Development Bank (ADB) today. This growth is primarily driven by a series of policy stimulus measures aimed at mitigating the risks posed by global trade uncertainties and a slowdown in domestic sectors. However, the forecast marks a slight moderation from last year’s 5.0% expansion, signaling ongoing challenges within the country’s economic environment.

The global trade landscape remains volatile, and uncertainties surrounding international trade agreements, particularly the proposed new tariffs from the United States, are expected to impact both global demand and China’s export performance. These external factors, compounded by a slowdown in global trade, have led to the ADB’s cautious growth outlook for 2025, with the economy expected to decelerate further to 4.3% in 2026.

According to Safdar Parvez, ADB’s Country Director for the PRC, the government’s focus on fiscal expansion and domestic consumption will help alleviate the negative effects of the global trade tensions and property market challenges. "The increased policy support should help counteract the property market slowdown and deceleration of export growth as the proposed new US tariffs take effect," Parvez stated. "The policy focus on boosting household consumption should improve domestic demand, which is much needed to sustain GDP growth in China."

Key Policy Measures and Domestic Challenges

Fiscal expansion remains a key strategy for the Chinese government to foster economic growth. The Chinese authorities are prioritizing national strategic projects and advanced manufacturing, alongside promoting technological innovation. Moreover, substantial support will be directed toward small and medium-sized enterprises (SMEs) to encourage job creation and innovation.

While the property sector is receiving targeted incentives to promote housing purchases, the high level of housing inventory continues to weigh on property market investment, a trend that is expected to persist through 2025 and into the following year. Efforts to stimulate the sector may be dampened by the ongoing inventory surplus, leading to a tempered recovery in property-related investments.

The ADB also highlighted the importance of domestic consumption in driving growth. The government's focus on increasing household income and encouraging consumption is aimed at counteracting weak export performance and reducing reliance on foreign trade. This policy shift is expected to provide a cushion against the slower global demand and bolster domestic demand, which remains a critical driver of the Chinese economy.

Inflation Outlook and Economic Risks

Inflation in China is expected to remain subdued in the short term, with a slight increase to 0.4% in 2025, compared to 0.2% in 2024. The ADB projects that inflation will rise slightly to 0.7% in 2026, though it is likely to remain low due to weak private demand. The subdued inflationary pressures can be attributed to a combination of factors, including the slow recovery in consumer spending and a relatively stable agricultural sector.

The country’s industrial output, which has been growing steadily, is expected to play a key role in containing inflationary pressures. As industrial production continues to increase, it should help offset potential inflationary risks stemming from higher commodity prices or supply chain disruptions.

However, the economic outlook remains fraught with risks. The evolving stance of the United States on foreign trade, particularly the imposition of new tariffs, could exacerbate global trade tensions and negatively impact China’s export sector. The uncertainty surrounding these trade measures is expected to be a key risk factor in the coming years, especially as the US and China continue to navigate their trade relationship.

Risks and Upside Potential

The property sector remains a significant risk to the overall economic outlook. If the sector fails to respond effectively to government policy measures, it could pose further challenges to China’s growth trajectory. The property market’s sluggish recovery could also have a ripple effect on related industries, including construction, retail, and finance.

On the upside, the ADB notes that there is potential for stronger-than-expected growth if additional supportive policy measures are implemented, particularly those designed to bolster private sector confidence. If these measures succeed in boosting consumer and business sentiment more rapidly than anticipated, they could lead to stronger GDP growth and higher inflation than currently forecast.

Conclusion

In conclusion, while China’s economic growth is projected to remain relatively stable in 2025, the country faces a number of challenges that could affect its growth trajectory in the coming years. The government’s proactive fiscal policies and focus on boosting domestic demand will be crucial in sustaining growth, while global trade uncertainties and the performance of the property sector present ongoing risks. The outlook remains cautious, but there is also the potential for stronger economic performance if policy measures are successful in stimulating the domestic economy. As the global trade environment continues to evolve, the PRC’s ability to navigate these challenges will be critical in determining its future economic performance.