SINGAPORE, October 16, 2025 – China’s economy is showing signs of gradual recovery as it navigates a complex phase of structural transformation. While new and innovative industries are expanding at a strong pace, overall domestic demand continues to face pressure from a sluggish property market and an unpredictable global environment.
The ASEAN+3 Macroeconomic Research Office (AMRO) forecasts GDP growth of 4.8 percent for 2025, moderating to 4.4 percent in 2026. These projections follow AMRO’s preliminary findings from its Annual Consultation Visit to China, conducted between August 28 and September 13, 2025.
The consultation was led by Lead Economist Jae Young Lee, with AMRO Director Yasuto Watanabe and Chief Economist Dong He engaging in high-level policy discussions. Topics included near-term economic drivers and constraints, macroeconomic policy settings, financial vulnerabilities, and strategies to support both short-term stabilization and long-term structural reform.
“China’s post-pandemic rebound has progressed, but the recovery remains uneven,” said Dr. Lee. “Emerging sectors are gaining traction, while traditional engines of growth continue to weaken. Sustained expansion will depend on decisive action to resolve legacy issues and reforms that strengthen household purchasing power.”
Economic momentum improved in late 2024 and carried into the first half of 2025. Fiscal measures helped boost private consumption, which accounted for over half of GDP growth during the first six months of the year. Exports also contributed positively, supported in part by提前 shipments ahead of anticipated U.S. tariff increases.
Government stimulus has lifted retail activity and infrastructure spending. However, consumer confidence remains fragile due to sluggish wage growth and ongoing instability in the real estate sector.
Persistent competitive pressures, cautious consumer behavior, and rising production capacity have kept inflation in check. Core inflation remains slightly positive, while headline figures show little movement. AMRO expects the Consumer Price Index (CPI) to average 0.0 percent in 2025, rising marginally to 0.4 percent in 2026.
Near-term risks are skewed to the downside, as China manages a mix of domestic structural challenges and external uncertainties. On the upside, faster resolution of property sector imbalances and local government debt issues could provide a stronger-than-expected boost to economic activity.
Domestic headwinds include deep adjustments in the housing market, financial stress among certain regional governments, and deteriorating asset quality at some smaller banks. Long-term structural issues such as aging demographics, climate change, and global economic fragmentation also pose significant challenges.
Externally, uncertainty surrounding U.S. trade policy remains a key risk. Potential restrictions on cross-border investment and technology flows could dampen business sentiment and increase volatility in financial markets. Escalating geopolitical tensions may further complicate China’s efforts to rebalance its economy and sustain long-term growth.
In response, authorities have adopted an expansionary fiscal stance in 2025 to stimulate domestic demand. Key initiatives include expanding consumer trade-in programs, accelerating fiscal transfers to local governments, and introducing nationwide childcare subsidies. Given the downside risks, fiscal support is expected to remain active in 2026, complemented by targeted policy measures.
Monetary policy remains accommodative, with record-low policy rates and ample liquidity in the financial system. However, weak demand for credit persists despite lower borrowing costs. The central bank should maintain its supportive stance, with room for additional easing to reduce refinancing burdens and prevent real debt levels from rising, while ensuring financial stability and reinforcing fiscal efforts to restore confidence.
Improved coordination between central and local authorities is essential to address excess housing inventory and support a recovery in the property market. Rebuilding buyer confidence will require ensuring the completion of pre-sold homes and tailoring policy responses to the specific conditions of different city tiers.
For long-term sustainable growth, local government finances must be placed on a more stable footing. This will require reforms in the fiscal relationship between central and regional authorities. Equally important is strengthening household consumption through a higher share of national income going to labor and a fiscal framework focused on public services, social protection, and human capital development.
A successful transition to high-quality growth will also require revising incentive structures that have led to overinvestment in certain sectors. A more disciplined industrial strategy can enhance productivity, encourage private sector participation, and support green and digital transformation. Deeper reforms in the financial system and capital markets, along with improved transmission of monetary policy, will help allocate capital more efficiently.
Amid rising protectionism and global economic fragmentation, China has an opportunity to champion a rules-based international trading system by aligning domestic reforms with global standards.
AMRO expressed its appreciation to Chinese authorities and other stakeholders for their cooperation and open dialogue during the consultation.
About AMRO
The ASEAN+3 Macroeconomic Research Office (AMRO) is an international institution established to promote macroeconomic and financial stability in the ASEAN+3 region, which includes the 10 ASEAN countries, China, Hong Kong (China), Japan, and Korea. AMRO conducts economic surveillance, supports regional financial arrangements, and provides technical assistance. It also serves as a knowledge hub for regional economic cooperation.
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China’s Economic Recovery: Transitioning to High-Quality Growth
SINGAPORE, October 16, 2025 – China’s near-term growth is gradually gathering momentum as the economy undergoes a challenging transition. Emerging sectors are expanding briskly. However, domestic demand remains constrained by the real estate sector downturn and the uncertain external environment. n nTaking these factors into consideration, the ASEAN+3 Macroeconomic Research Office (AMRO) projects China’s GDP growth at 4.8 percent in 2025 and 4.4 percent in 2026. This projection is based on AMRO’s preliminary assessment following its Annual Consultation Visit (ACV) to China from August 28 to September 13, 2025. n nThe AMRO team was led by Lead Economist Jae Young Lee, while AMRO Director Yasuto Watanabe and Chief Economist Dong He participated in key policy meetings. Discussions centered on the drivers and constraints of China’s near-term economic outlook, key risks and vulnerabilities, macroeconomic policy stance, and policy space to bolster recovery and support structural transformation. n nEconomic developments and outlook n n“China’s post-COVID economic recovery has progressed steadily. However, it has taken on a two-speed trajectory, with emerging sectors gaining momentum while traditional growth engines remaining subdued,” said Dr. Lee. “In the near term, the economic recovery is on track. Stronger and sustained growth will require addressing legacy issues forcefully and implementing structural changes to boost household incomes.” n nGrowth rebounded in the fourth quarter of 2024 and momentum was sustained through the first half of 2025. Supported by fiscal policies, private consumption contributed more than half of GDP growth in the first six months of 2025. Strong exports, partly driven by frontloaded shipments ahead of possible US tariff hikes, supported the recovery. n nFiscal stimulus has lifted retail sales and infrastructure investment, but consumer spending remains subdued amid weak income growth and ongoing property market pressures. n nMeanwhile, the combination of intense competition, cautious consumer sentiment, and continued expansion of production capacity has kept prices low—leaving core inflation moderately positive and headline inflation flat. AMRO projects China’s CPI inflation at 0.0 percent in 2025 and 0.4 percent in 2026. n nRisks and vulnerabilities n nThe balance of near-term risks is tilted to the downside, as China navigates a complex mix of legacy issues and long-term structural challenges, both domestic and external. On the upside, a faster resolution of the property sector overhang and local government financing difficulties could provide a larger-than-expected boost to economic activity. n nDomestically, cyclical and structural headwinds include the profound adjustments in the real estate sector, persistent financing strains on some local governments, and asset quality deterioration for some small and medium-sized banks. Longer-term challenges include population aging, climate change, and geoeconomic fragmentation. n nExternally, persistent high uncertainties in US trade policy could weigh on China’s exports and growth. Adverse developments in US policies, such as those affecting cross-border investment and technology exchange, could further dampen investment sentiment and increase financial market volatility. Deeper geopolitical fault lines could also complicate China’s efforts to rebalance its economy and sustain long-term growth. n nPolicy recommendations n nThe authorities have appropriately adopted an expansionary fiscal stance in 2025 to support domestic demand. Key measures include scaling up the consumer trade-in program, accelerating fiscal transfers, and introducing national childcare subsidies. With near-term risks tilted to the downside, fiscal policy will likely need to remain expansionary in 2026, complemented by targeted policy initiatives. n nThe accommodative monetary policy stance remains appropriate, supported by record-low policy rates and ample liquidity. However, persistently weak sentiment—despite lower borrowing costs—continues to dampen credit demand. Monetary policy should stay accommodative, with scope for further easing to reduce refinancing costs and pre-empt rising real debt burdens, while safeguarding financial stability and reinforcing fiscal efforts to restore confidence and revitalize growth. n nStronger policy coordination between central and local governments is needed to address housing inventory overhang and support real estate recovery. Restoring homebuyer confidence requires ensuring the delivery of pre-sold houses and tailoring policies for cities in different tiers according to their specific conditions and challenges. n nAchieving sustained, high-quality growth over the long term will require placing local government finances on a sound and sustainable footing. This calls for further reforms in the central-local fiscal relationships. Equally important is fostering more resilient and inclusive household consumption, underpinned by a higher labor share in national income and a people-centered fiscal framework that prioritizes public services, social protection, and human capital. n nA successful growth transition will require recalibrating incentive systems that have driven over-investment in a few concentrated sectors. A more disciplined industrial policy could raise productivity, crowd in private investment, and facilitate green and digital transformation. Deeper financial sector and capital markets reforms, supported by stronger monetary policy transmission, will help improve the allocative efficiency of capital. n nAgainst a backdrop of rising protectionism and geoeconomic fragmentation, China can play a leading role in upholding the rules-based global trading system by aligning domestic reforms with global standards. n nThe AMRO team would like to express its sincere appreciation to the Chinese authorities and other participating organizations for their cooperation and candid exchange of views during the mission. n nAbout AMRO n nThe ASEAN+3 Macroeconomic Research Office (AMRO) is an international organization established to contribute toward securing macroeconomic and financial resilience and stability of the ASEAN+3 region, comprising 10 members of the Association of Southeast Asian Nations (ASEAN) and China; Hong Kong, China; Japan; and Korea. AMRO’s mandate is to conduct macroeconomic surveillance, support regional financial arrangements, and provide technical assistance to the members. In addition, AMRO also serves as a regional knowledge hub and provides support to ASEAN+3 financial cooperation.