Economy expected to maintain steady pace

China’s economy is expected to maintain steady momentum in the second half of the year amid continuous policy support, with international institutions’ raised growth forecasts reflecting strengthened confidence in the world’s second-largest economy, economists and analysts said.

With the country’s top leadership having clearly signaled consistent macro policy support to sustain the economic rally, they said that measures in the pipeline may include more consumption subsidies, additional public investment in urban renewal and accelerated reduction of housing market inventory.

Their comments came as the International Monetary Fund significantly raised its forecast for China’s full-year economic growth to 4.8 per cent in its World Economic Outlook Update report on 29 July, up 0.8 percentage point compared with its forecast in April.

The revision reflects the Chinese economy’s stronger-than-expected activity in the first half of the year and the significant reductions in tariffs between China and the United States, the IMF report said, as China received the largest upgrade in forecast among major economies.

The IMF, which nudged the full-year global growth forecast for 2025 from 2.8 per cent to 3 per cent, also revised China’s growth forecast for 2026 upward by 0.2 percentage point to 4.2 per cent, due in part to lower effective tariff rates than previously assumed in the April forecast.

More signs of de-escalation in Sino-US trade tensions emerged on 29 July. Based on the consensus achieved during the third round of China-US economic and trade talks in Stockholm, Sweden, both sides will continue pushing for a continued extension by 90 days of the pause on 24 per cent reciprocal tariffs of the US, as well as countermeasures by China.

The IMF’s upward revision follows major international financial institutions, such as Morgan Stanley, Goldman Sachs, UBS and Nomura, which raised their expectations for China’s economic growth, thanks to a 5.3 per cent year-on-year expansion in the first half.

Citing factors such as China’s robust GDP growth of 5.2 per cent in the second quarter, Goldman Sachs said in a report on 28 July that it retains its overweight stance on Chinese equities in a regional context, while revising its 12-month target for the MSCI China Index to 90 from 85. The MSCI China Index is a stock market index that tracks the performance of large and mid-cap Chinese companies listed in both China and abroad.

Zhang Bin, a nonresident senior fellow at the China Finance 40 Forum and a national political adviser, said that China’s economic growth has been resilient this year, as industrial production maintained solid momentum while exports to other regions offset the decline of exports to the US.

With 5.3 per cent first-half growth, Zhang said that China’s full-year GDP growth target of about 5 per cent should be well within reach. However, he noted that the challenge of insufficient demand — and, therefore, pressures on the labour and capital markets — may intensify in the second half amid lingering property market weakness and the unfolding impact of US tariffs on exports.

This has necessitated further macro policy support, said Zhang, who suggested the issuance of additional government bonds in the second half to boost public investment in urban renewal.

The Political Bureau of the Communist Party of China Central Committee held a tone-setting meeting on 30 July that made arrangements for economic work in the second half of the year. The meeting emphasised that macro policies should continue to exert force and be strengthened at an appropriate time, calling for efforts to expand consumer demand by ensuring and improving people’s living standards, carrying out high-quality urban renewal, and consolidating the capital market’s trend of stabilisation and improvement.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said the meeting indicated that macro policies will continue to focus on growth stabilisation in the second half.

Anticipated measures include further interest rate cuts, consumption subsidies in more sectors such as travel, and greater advancements in using government bonds to purchase unsold property stock for affordable housing purposes, Wang said.