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(Bloomberg) -- Goldman Sachs Group Inc. and other major banks boosted their forecasts for China’s 2025 economic growth, citing a better outlook for exports following the tariff truce with the US.
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Economists at Goldman Sachs, JPMorgan Chase & Co., ING Groep NV and Bloomberg Economics this week lifted their projections to 4.6% or above from as low as 4% previously. China could avoid a contraction in exports this year after striking a temporary deal with the US to de-escalate their trade conflict, Goldman said in a note Tuesday.
In what could disappoint markets, the rosier outlook reduces the amount of additional stimulus policymakers might need to roll out to cushion the tariff impact, such as greater government borrowing and spending. Chinese stocks fell in Hong Kong on Tuesday as initial optimism from the truce faded, before rising again on Wednesday morning.
JPMorgan on Monday removed its forecast for 1 trillion yuan ($139 billion) worth of fiscal stimulus it previously foresaw around a July meeting of the elite Politburo. Goldman Sachs now expects only one 10-basis point policy rate cut in the rest of this year, instead of two reductions of the same size previously.
What Bloomberg Economics Says...
“Working out the details of a trade agreement will be fraught and could take time. For now, China has secured some breathing room — valuable time as it races to develop high-tech industries and bolster domestic demand to reduce the economy’s vulnerability to external shocks. Ultimately, the extent China is able to lift consumption and investment will determine the longer-term growth path.”
— Chang Shu and David Qu
Click here to read the full report.
Chinese and US trade negotiators on Monday announced an agreement to lower additional tariffs imposed during Trump’s second term by more than anticipated, broadly taking China’s blanket tariffs on US goods to 10% and US levies on China to 30% during a 90-day period.
As a result, the average US tariff rate on China has fallen to around 40% from about 110% previously, according to Bloomberg Economics estimates.
The tariff truce will likely boost Chinese exports in the coming months as US importers rush to fill their depleted inventories and front-load more orders.