Investment banks raise China's GDP forecast after tariff pause
[SHANGAHI] Global investment banks are raising their forecasts for China's economic growth this year, after Beijing and Washington agreed to a 90-day pause on tariffs, despite uncertainty around Sino-US trade negotiations.
The deal reached between the US and China after bilateral talks in Geneva last weekend surpassed market expectations, as both sides agreed to significantly roll back most of the tariffs imposed on each other's goods since early April.
The latest upgrade represents the third major revision by some banks in the past few months, largely due to rapidly evolving US trade policy under President Donald Trump and its impact on the world's second-largest economy.
In mid-April, seven investment banks had downgraded their gross domestic product (GDP) forecasts for China to an average of about 4 per cent this year, compared to their previous predictions of 4.5 per cent. China's official target for full-year GDP is around 5 per cent.
Here is a summary of some forecasts for China's GDP (new (previous)):
CITI (2025: 4.7% (4.2%))
'With trade tensions defused and domestic economy holding up well so far, we believe potential stimulus could be put on hold now.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
'We no longer expect any revision to the fiscal budget or government bond quota approved by the National People's Congress (NPC) for this year. If more support is warranted later, it is likely to come from policy banks or other quasi-fiscal tools, considering the PSL (pledged supplementary lending) rate was just cut.'
UBS (2025: 4% (3.4%))
'Lingering uncertainties may continue to weigh on corporate confidence, delay domestic capex plans, and lead to further supply chain shift outside of China.
'Front-loading of export shipments to the US may continue in the 90-day pause period, which may push up China's export growth in the near term but lead to a negative payback later this year.'
Goldman Sachs (2025: 4.6% (4 %)), (2026: 3.8% (3.5%))
'With the resumption of US-China trade talks, the left-tail risk of miscalculation between the US and China could be more contained vs. before, in our view.
'However, given still-elevated uncertainties around US-China relations, the private sector sentiment may remain fragile, and macro data could be volatile in coming months.'
Commerzbank (2025: 4% (3.8%))
'Beyond the 90-day period, it is too early to tell whether the truce will continue, and what the tariff rates will be. We also have doubts about the expansion in consumption despite Beijing's policy easing measures.
'Also, it is still unclear how the high-level plans on boosting household spending and income and supporting the service sector are being implemented at the local level. We therefore expect growth in H2 will be under pressure.'
Societe Generale (2025: 4.6% (4%)), (2026: 4.2% (4%))
'Probable export frontloading during the 90-day US-China tariff truce suggests we may not see sizeable weakening in overall economic momentum until mid-3Q. Therefore, Beijing will likely continue to withhold any significant increase in stimulus in the short term.
'There is a constant choice between maintaining economic stability and preserving policy room for worse outcomes, as the prospects of US-China negotiations remain uncertain.
'In terms of monetary policy, we are scaling back our easing calls to a 20-basis-point (bp) policy rate cut and a 50 bps reserve requirement ratio (RRR) cut by year-end, down from 40 bps and 100 bps previously.'
Nomura (2025: 4.5% (4.0%))
'The substantial tariff reduction will support a resumption of trade flows between the US and China, although its impact should not be overstated, as the remaining 30 per cent tariff could still depress exports of certain products, especially with the US economy slowing.
'The resumption of US-bound shipments will naturally reduce the need to re-route shipments. Front-loading will be inevitably followed by a significant payback effect after the 90-day pause ends on Aug 12.
'We still believe it will be quite challenging for Beijing to achieve its 'around 5 per cent' growth target unless it rolls out a sizable stimulus package. Considering the respite on the trade war, Beijing might be under less pressure to introduce the necessary stimulus and reforms.' REUTERS
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CNA
an hour ago
- CNA
Wall Street choppy, oil dips as US holds back from Mideast military action
NEW YORK :Major Wall Street indexes closed lower on Friday while oil prices fell after U.S. President Donald Trump held back from immediate military action in the Israel-Iran conflict. All eyes remained trained on the Middle East one week after an initial Israeli assault drew Iranian retaliation. The U.S. imposed Iran-related sanctions a day after Trump said he might take two weeks to decide on further action. According to preliminary data, the S&P 500 lost 0.21 per cent, while the Nasdaq Composite shed 0.49 per cent. The Dow Jones Industrial Average, however, rose 38.47 points, or 0.09 per cent, to 42,210.13. Stocks had been broadly positive at the open, and dipped in and out of negative territory during the session. Global benchmark Brent crude futures fell 2.3 per cent to settle at $77.01 a barrel, but gained 3.6 per cent in the week. Front-month U.S. crude - which did not settle on Thursday due to a U.S. holiday and expires on Friday - ended down 0.28 per cent at $74.93, with a weekly gain of 2.7 per cent. "Investors are a little bit nervous about buying stocks right in front of this situation and, more specifically, right in front of this weekend," said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey. The new sanctions target entities, individuals and vessels providing Iran with defence machinery, and were seen as a sign of a diplomatic approach from the Trump administration. "However, while Israel and Iran carry on pounding away at each other, there can always be an unintended action that escalates the conflict and touches upon oil infrastructure," PVM analyst John Evans said. European foreign ministers urged Iran to engage with the U.S. over its nuclear programme after high-level talks in Geneva about a potential new nuclear deal ended with little sign of progress. Europe's main bourses [.EU] had ended their session a touch higher, following similar gains across Asia. MSCI's gauge of stocks across the globe fell 0.01 per cent on the day. Gains on Hong Kong's Hang Seng, and South Korea's Kospi linked to newly elected President Lee Jae Myung's stimulus, had boosted Asian shares during that session. FED SPLIT Federal Reserve policymakers made their first public comments since Chair Jerome Powell said on Wednesday that borrowing costs were likely to fall this year, but that he expects "meaningful" inflation ahead as Trump's tariffs raise prices for consumers. The close split between governors on how to manage the risks was in full view as Governor Christopher Waller said the central bank should consider cutting as soon as the next meeting, while the Richmond Fed's Tom Barkin said there was no urgency to cut. Powell had also cautioned on Wednesday against holding on too strongly to the forecasts. Treasury yields fell after Waller's comments, and as concerns about the Middle East conflict supported demand for safe haven bonds. The yield on benchmark 10-year notes fell 2 basis points to 4.375 per cent, from 4.395 per cent late on Wednesday. Demand rose for the U.S. dollar, pushing the greenback to a three-week high against the yen. The dollar rose 0.03 per cent against a basket of currencies including the yen and the euro , with the euro up 0.3 per cent at $1.1528. The index is poised to rise 0.6 per cent this week.
CNA
2 hours ago
- CNA
Oil prices settle lower as US sanctions ease fears of escalation in Iran
HOUSTON :Oil prices settled down on Friday as the U.S. imposed new Iran-related sanctions, marking a diplomatic approach that fed hopes of a negotiated agreement, a day after President Donald Trump said he might take two weeks to decide U.S. involvement in the Israel-Iran conflict. Brent crude futures settled down $1.84, or 2.33 per cent, to $77.01 a barrel. U.S. West Texas Intermediate crude for July - which did not settle on Thursday as it was a U.S. holiday and expires on Friday - was down 21 cents, or 0.28 per cent, at $74.93. The more liquid August contract settled at $73.84. Brent rose 3.6 per cent on the week, while front-month U.S. crude futures increased 2.7 per cent. The Trump administration issued fresh Iran-related sanctions, including on two entities based in Hong Kong, and counter-terrorism-related sanctions, according to a notice posted to the U.S. Treasury Department website. The sanctions target at least 20 entities, five individuals and three vessels, according to Treasury's Office of Foreign Asset Control. "Those sanctions are cutting both ways. They may be part of a broader negotiation approach towards Iran. The fact they are undertaking this is a signal they are trying to resolve this outside of conflict," said John Kilduff, partner at Again Capital in New York. Oil prices jumped almost 3 per cent on Thursday after Israel bombed nuclear targets in Iran, while Iran - OPEC's third-largest producer - fired missiles and drones at Israel. Neither side showed any sign of backing down in the week-old war. Brent prices retreated after the White House said Trump would decide whether the United States would get involved in the Israel-Iran conflict in the next two weeks. 'Although a major escalation is yet to occur, risks to supply from the region remain high, still hinging upon the potential for U.S. involvement,' said Russell Shor, senior market analyst at Israel's UN ambassador said Israel seeks genuine efforts on Iran's nuclear capabilities from Friday's meeting between European and Iranian ministers, not just another round of talks. "However, while Israel and Iran carry on pounding away at each other, there can always be an unintended action that escalates the conflict and touches upon oil infrastructure," PVM analyst John Evans said. Iran in the past has threatened to close the Strait of Hormuz, a vital route for Middle East oil exports. Oil exports so far have not been disrupted and there is no shortage of supply, said Giovanni Staunovo, an analyst at UBS. "The direction of oil prices from here will depend on whether there are supply disruptions," he said. An escalation of the conflict in such a way that Israel attacks export infrastructure or Iran disrupts shipping through the strait could lead to oil at $100 a barrel being a reality, said Panmure Liberum analyst Ashley Kelty. Elsewhere, the EU has abandoned its proposal to lower the price cap on Russian oil to $45, Bloomberg reported. U.S. energy firms this week cut the number of oil and natural gas rigs operating for an eighth week in a row for the first time since September 2023, energy services firm Baker Hughes said in its closely followed report. The oil and gas rig count, an early indicator of future output, fell by one to 554 in the week to June 20, the lowest since November 2021.
Straits Times
5 hours ago
- Straits Times
Latvian president believes NATO will overcome obstacles, meet 5% goal
RIGA - Latvia's president expressed confidence NATO would agree to a new higher defence spending target demanded by U.S. President Donald Trump, despite Spanish objections, saying the alliance had little choice given the growing threat from Russia. Spain on Thursday asked to opt out of the plan to increase members' defence spending to 5% of their gross domestic product, as requested by Trump, a move which could derail next week's NATO summit at the Hague. Any agreement to raise defence spending needs unanimous approval by the 32 member states. Latvian President Edgars Rinkevics told Reuters on Friday he understood why countries further from Russia might have difficulties convincing their voters to spend more on defence. But he said the need was pressing. 'I do hope there is the understanding in Madrid that this is a critical time for the Alliance, both when it comes to (increasing) its defence capabilities, but also to the Trans-Atlantic relationship,' he said in an interview in Riga. 'I think that they don't have much of a choice,' he added. At an estimated 1.28% of GDP, Spain had the lowest proportion of expenditure on defence in the alliance last year, according to NATO estimates. Latvia and fellow Baltic states Lithuania and Estonia are urgently ramping up their militaries, fearing that their neighbour and former overlord Russia could push on from its 2022 invasion of Ukraine to take more territory. They spent more than 3% of GDP on defence this year, and have committed to top 5% for the next few years. "We are saying that we need to spend as soon as possible now in order to avoid a worst-case scenario, spending much more later," Rinkevics said. "While Russia is stuck in Ukraine, that possibility of a direct military attack is not very high," he said. "But it may change very, very quickly ... if a development in Ukraine leads Russian leadership to believe that NATO is weak, that Ukraine is defeated, that NATO is divided". REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
