The World Bank on Tuesday raised its 2025 growth forecast for China to 4.8%, up from the 4% it projected in April, according to the World Bank’s East Asia and Pacific Economic Update.
The revision aligns the forecast with China’s official target of around 5% GDP growth in 2025. The upgrade comes after a summer marked by steep U.S. tariffs and global market volatility that disrupted trade flows across the region.
Bank economists did not give a single reason for the change but said government support has propped up the economy, warning that these policies may lose momentum next year.
Trade tensions between China and the United States escalated in April when Trump’s tariffs on China briefly exceeded 100%, but then both governments struck a temporary truce that will last until mid-November, thanks to Treasury Secretary Scott Bessent.
As of right now, tariffs on China stand at 57.6%, more than twice their level at the start of the year, which has prompted companies to accelerate orders, providing a temporary boost to China’s exports, which remains a key driver of growth as the domestic economy weakens.
China expands stimulus and lifts exports
Late in 2024, China launched new stimulus measures, including targeted consumer trade-in programs to support retail spending. These policies helped offset weaker demand at home, while exports to Southeast Asia and Europe rose enough to balance the sharp fall in shipments to the United States.
Businesses rushing to import before tariffs increase further have also supported this export strength. But the World Bank expects this momentum to fade. Its projections show China’s GDP growth easing to 4.2% in 2026 as export growth slows and policymakers reduce stimulus to control public debt.
Official data reflects the strain. Retail sales in August rose only 3.4% from a year earlier, below expectations. Real estate investment dropped 12.9% in the first eight months of the year, compared with a 12% decline in the first seven months.
These figures underline the ongoing property slump and weak consumer confidence. The eight-day Golden Week holiday, ending Wednesday, also showed lackluster spending.
Average daily domestic passenger trips from October 1 to 5 rose 5.4% year-on-year to 296 million, far below the 7.9% growth recorded during the May 1 to 5 public holiday.
Nomura’s Chief China Economist Ting Lu said in a Monday report that “actual consumption growth could be even weaker than the data suggest” because this year’s Golden Week combined what have typically been two separate holidays.
Golden Week timing also changed. China’s National Day fell on October 1, while the Mid-Autumn Festival landed on October 6, compared with September 17 last year. This extended the holiday from October 1 to 8 this year versus October 1 to 7 last year.
Despite the longer break, consumer spending remained soft, suggesting deeper issues in household demand that stimulus alone has not fixed.
China faces youth jobless crisis and regional spillover
Economists say one in seven young people in China is unemployed. The country is also confronting an aging population and rapid technological disruption.
The World Bank noted that startups in China create jobs at only four times their base level compared with sevenfold in the United States, attributing the gap to the heavier role of state-owned firms.
These structural weaknesses add to the pressure on policymakers trying to maintain stable growth while avoiding a debt surge.
The ripple effects of China’s performance reach beyond its borders. The World Bank estimates that a 1 percentage point drop in China’s GDP knocks 0.3 percentage points off growth in the rest of developing East Asia and the Pacific.
With the upgraded China forecast, the region is now expected to expand by 4.8% this year, up from 4% predicted earlier in the year.
The global backdrop remains weak. In June, the World Bank cut its 2025 global growth forecast to 2.3%, citing trade uncertainty. This would mark the slowest expansion since 2008 outside of recession years.
The upgraded outlook for China and East Asia offers some relief, but the data also shows how fragile the recovery remains under high tariffs and fading stimulus.
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Source: https://www.cryptopolitan.com/chinas-growth-outlook-raised-to-4-8/
