Global banks, institutions optimistic on China growth

Major global banks and institutions raised their forecasts for China's economic growth this year following the country's stronger-than-expected first-half performance, reflecting their confidence in the world's second-largest economy despite persistent external challenges.

Foreign institutions, including Morgan Stanley, Goldman Sachs, UBS and Nomura, upgraded their full-year GDP growth estimates for China, which are closer to the country's official growth target of around 5 percent.

Morgan Stanley recently raised its forecast for China's 2025 GDP growth from 4.5 percent to 4.8 percent, while Goldman Sachs lifted its outlook for China's 2025 GDP growth to 4.7 percent from the previous 4.6 percent.

While China's economy has remained steady amid the United States' tariff hikes, economists warned that it still faces pressures from lackluster domestic demand, a sluggish property sector, and mounting external uncertainties. These challenges, they said, underscore the need for additional measures to stimulate consumption and advance structural reforms to sustain the recovery.

China's second-quarter GDP came in slightly above market consensus amid mixed June activity data, reflecting the resilience of its exports amid the US-China trade conflicts, Goldman Sachs said in a recent report.

Data from the National Bureau of Statistics showed that the Chinese economy expanded 5.3 percent year-on-year in the first half of 2025, with 5.2 percent growth in the second quarter and 5.4 percent growth in the first quarter.

With China's real GDP growth still solid, Goldman Sachs said it does not think policymakers see an immediate need to launch broad-based, significant stimulus in the near term. "Instead, we expect incremental, targeted easing to help stem the property downturn and mitigate labor market pressures in the second half."

To reflect the higher-than-expected second-quarter GDP growth, Nomura marginally revised upward its 2025 annual GDP growth forecast for China to 4.6 percent from 4.5 percent, while UBS upgraded its 2025 China GDP forecast to 4.7 percent.

Zhang Ning, senior China economist at UBS Investment Bank, noted that export resilience, the boost from trade-in subsidies on a low base, earlier issuance of government bonds, and implementation of planned policy support underpinned first-half GDP growth.

Looking into the second half of the year, Zhang said the government will likely deliver the remaining part of broad fiscal stimulus, including the planned trade-in subsidies.

"On top of this, we think the government needs to roll out another over 1 percent of GDP fiscal stimulus to mitigate growth headwinds and lift GDP growth close to the 'around 5 percent' target," Zhang said. "We continue to expect the People's Bank of China (the country's central bank) to cut policy rates by another 20 basis points to 30 basis points in the second half, and more measures to facilitate property inventory destocking."

Although China's economy has shown considerable resilience in the face of risks and challenges in the first half, Wang Yiming, vice-chairman of the China Center for International Economic Exchanges, warned of challenges ahead, including external uncertainty, insufficient domestic demand, property downturns and persistently low domestic price levels.

"We need to better integrate efforts to expand domestic demand with supply-side structural reforms," he said. "The key issue remains insufficient domestic demand, especially on the consumption side."

To unlock consumption potential, Wang said it is necessary to further raise household income, expand spending on public services, and significantly boost consumption of services.

"Given the macroeconomic performance in the first half, the likelihood of achieving 5 percent growth this year is relatively high," said Zhang Yuxian, director of the Department of Economic Forecasting at the State Information Center. "If we anchor our macroeconomic policy on inflation, domestic consumption and safeguarding livelihoods, there remains significant scope for further policy action in the months ahead."