With another trade war looming, China is going to dig deeper into its pockets to stimulate demand and likely to keep its growth target at c.5% for 2025; budget deficit may be widened to 3.5% of GDP.
2025 growth forecast is maintained at 4.5%, as stimulus should partially offset higher tariffs, Standard Chartered’s economists note. The central bank appears prepared to inject sufficient liquidity “President-elect Trump announced higher tariffs on Mexico, Canada and China even before his inauguration. We think it is now unrealistic for China to continue to count on external demand to ride out the housing market correction.
An ambitious growth target is likely to be adopted to anchor market expectations and change the deflationary mindset. We expect the official budget deficit to be widened to 3.5% of GDP in 2025 from 3.0% in 2024, and a 25-30% increase in central and local special bond issuance to finance additional spending and facilitate bank recapitalisation and the local debt swap programme. We estimate that a positive fiscal impulse would boost growth by 0.3-0.5ppt.
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