BOFIT Forecast for China 2024–2026 / 1

Abstract

China reported first-quarter GDP growth of 5.3 % year-over-year. As a caveat, the country continues to suffer from statistical shortcomings that make appraisal of the overall economic situation difficult. BOFIT’s own assessment finds that China’s official numbers have tended to somewhat overstate economic performance in recent years. In any case, this year’s “about 5 %” GDP growth target will be harder to achieve than last year due to structural and cyclical factors, as well as the government’s reduced room for stimulus. We see the Chinese economy growing by about 4 % this year, then slowing to around 3 % p.a. in 2025 and 2026. Beyond constraints on growth from the persisting real estate sector crisis and weak consumer confidence, tensions with China’s main trading partners cloud the prospects of its export industries. Financial sector risks remain elevated. On the positive side, government efforts to redirect funding to specific industries, particularly those in high-tech fields, could boost productivity and rebalance economic structures. The move comes with the risk, however, that support flows into wasteful investments, adds to overcapacity and inflames relations with China’s trading partners. Revived consumer confidence or significant improvement in the real estate market could support economic growth above our base scenario.