Economic growth will slow to 4.5% in 2026 and 4.3% in 2027. China’s high energy use and import dependencies expose it to global oil price increases, but cheaper sourcing, increasing reliance on renewables and abundant reserves will mitigate the impact. Exports will benefit from lower US tariffs and competitiveness gains in higher tech sectors. Consumption will be held back by high precautionary savings but supported by policy. Real estate investment will continue to contract and prices fall. The anti-involution campaign will weigh on business investment, but infrastructure investment will pick up driven by mega projects. The main risks are deeper disruption to energy markets and a greater slowing of global demand.
Monetary policy remains supportive, maintaining interest rates at very low levels and keeping open the possibility of interest rate or required reserve rate cuts. Fiscal policies have become slightly more supportive with quasi-fiscal measures, such as spending through development banks. While China has made rapid progress in expanding renewables generation, it needs to step up measures to reinforce energy security and reduce emissions.
