Our economic outlook for China
August 15, 2025
Growth momentum to weaken amid deflationary pressures
“Growth looks set to slow in the second half, given weaker exports after a frontloading to get ahead of U.S. tariffs, the fading fiscal impulse of a consumption trade-in program, and a continued deflationary feedback loop.”
Grant Feng,
Vanguard Senior Economist
We recently increased our 2025 GDP growth forecast to 4.8% from 4.6% thanks to better-than-expected real GDP growth in the second quarter, which lifted first-half growth to 5.3%—well above the government’s official target of “around 5%.”
However, a relatively muted shock from tariff increases and strong growth so far this year may lessen the urgency for additional policy stimulus. We expect growth to slow in the second half, owing to the payback of export and consumption frontloading, a still-ailing property sector, and elevated global uncertainty.
Given these developments, we foresee prevailing deflationary pressures continuing through the rest of 2025. The path toward reflation is likely to be gradual and bumpy.
China economic forecasts
Notes: GDP growth is defined as the annual change in real (inflation-adjusted) GDP in the forecast year compared with the previous year. Unemployment rate is as of December 2025. Core inflation is the year-over-year change in the Consumer Price Index, excluding volatile food and energy prices, as of December 2025. Monetary policy is the People’s Bank of China’s seven-day reverse repo rate at year-end.
Source: Vanguard.
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