BOFIT Forecast for China 2025–2027 / 1

Abstract

China’s economy continues to slow. The outlook for domestic demand remains depressed due to a lack of consumer confidence and prolonged problems in the real estate sector. China’s external prospects have also worsened. Output growth has outpaced domestic demand growth in recent years, with excess production going to exports. The trade war between the United States and China has increased uncertainty and weakened export demand. China’s other trading partners are also experiencing slowing demand growth, and many have become wary of their heavy dependence on Chinese imports further adding to trade tensions. This situation forces the Chinese government to take on increasing amounts of new debt to support the economy. Although we expect higher official growth figures, our forecast suggest China’s actual economic growth will remain below 4 % p.a. throughout the forecast period. Both upside and downside risks need be considered. Although a larger-than-expected government stimulus programme would boost growth, it would also exacerbate imbalances in the economy and financial market risks. External risks and uncertainty will remain high.