Morgan Stanley has raised its China GDP growth forecast to 4.5% for 2025 (from 4.2%)
- and 4.2% for 2026 (from 4.0%),
Morgan Stanley citing reduced tariff headwinds and an easing in global trade tensions.
The analysts assume additional US tariffs will be capped at 30%, allowing Beijing to adopt more measured and delayed stimulus.
Q4 2025 GDP is now projected to grow 4.0% YoY (up from 3.7%), as slower deceleration reflects the lighter external drag.
Nonetheless, structural challenges in housing and consumption continue to weigh, with nominal GDP growth forecast to stay soft at 3.5%-3.6% through 2025–26.
Deflationary pressures persist, with the GDP deflator seen at -0.9% in 2025 and -0.7% in 2026, driven by ongoing PPI deflation and subdued CPI inflation.
MS notes that while China’s policy remains focused on gradual economic rebalancing, a sharp pivot away from investment-led growth is unlikely in the near term.
