Goldman Sachs Research projects China’s economy will grow at 4.5% in 2025, down from 4.9% in 2024, as the government’s stimulus efforts partially offset potential US tariffs. The forecast assumes a 20 percentage-point tariff increase by the incoming Trump administration, reducing China’s real GDP (Gross Domestic Product) by 0.7 percentage points. Chinese policymakers are expected to introduce fresh stimulus to counterbalance the impact.

Chief China Economist Hui Shan explains, “The choice is simple: provide a large policy offset or accept lower GDP growth. We expect the former.”

Despite slower growth, China aims to steer its economy toward a technology-driven, self-reliant model, with an average GDP growth of 3.5% from 2025 to 2035. In 2025, significant policy rate cuts and fiscal deficit increases are anticipated. Strong exports have boosted GDP in 2024, but higher US tariffs may slow export growth.

Inflation projections for 2025 are lower than consensus estimates, with CPI (Consumer Price Index) at 0.8% and PPI (Producer Price Index) at 0% due to structural challenges. Household consumption, contributing 29% to GDP in Q3 2024, is expected to remain flat at 5% in 2025.

China’s property downturn continues to be a significant drag, with new home starts and land sales plummeting. The sector is projected to weigh on GDP growth by 2 percentage points in 2025.