May 9, 2025 (Fibre2fashion) –
China's economy is likely to see a major slowdown over the next two years, with gross domestic product (GDP) growth falling to 3.8 per cent in 2025 and 3.9 per cent in 2026 as trade tensions intensify and global economic conditions weigh on investment and consumer confidence, Moody's Ratings recently said.
In February, the rating agency had projected a GDP growth of 4.5 per cent and 4 per cent respectively for 2025 and 2026. The new projection also falls well short of the Chinese government's official 5 per cent growth target.
However, the country's GDP rose by 5.4 per cent year-on-year in the first quarter of 2025, indicating a strong start for the financial year.
This early-year boost was largely driven by a surge in exports and a combination of government fiscal and monetary policies aimed towards stabilising growth. Fixed asset investment improved, property sector contraction eased, and credit demand levelled off while industrial production and retail sales also showed signs of recovery, a report by the rating agency said.
However, it cautioned that without further stimulus beyond measures announced at the annual Two Sessions in March, the current momentum may not stay the same for long.
A heavy drop in Chinese shipments to the United States in April, combined with the growing impact of elevated tariffs, is casting a long shadow over the outlook for the coming months.
Moody's Ratings believes US tariffs on Chinese products will remain 'considerably restrictive' in the near term.
The rating agency said domestic demand remains vulnerable despite Beijing's continued investment in high-tech and green industries. Even support from government's fiscal and monetary policies is "unlikely to lift domestic demand enough to offset the negative impact on external demand".
The trade measures imposed by the China and United States on each other are "so prohibitively high that they would likely choke off most direct bilateral trade if they remain in place, on top of the likely short-term disruptions noted earlier," the report noted.
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