World Bank raises China growth forecast to 4.8% despite U.S. trade tensions

The World Bank has recently increased its growth forecast for China in 2025, along with an overall boost in projections for East Asia and the Pacific region. This positive outlook comes after a period of uncertainty caused by U.S. tariffs that impacted the global economy.

China’s economy is now expected to expand by 4.8%, up from the previous forecast of 4% made in April. This new projection is in line with China’s official target of achieving around 5% growth in gross domestic product for the year. The reasons for this upward revision were not explicitly stated by the economists, but they did mention that China has benefited from government support which may diminish in the coming year.

The trade tensions between China and the U.S. escalated earlier in the year, leading to a temporary surge in U.S. tariffs on Chinese imports. However, a trade truce was reached between the two countries, with tariffs currently at 57.6%, more than double the initial rate at the beginning of the year. China responded by implementing stimulus measures and consumer trade-in programs to boost retail sales, while exports to Southeast Asia and Europe helped offset a decline in exports to the U.S.

Despite challenges such as a real estate downturn and subdued consumer spending, China’s exports have continued to drive growth. However, the momentum is expected to slow down in the coming years. The World Bank predicts that China’s GDP growth will ease to 4.2% in 2026, partly due to a deceleration in exports growth. Additionally, Beijing is likely to reduce stimulus measures to prevent a rapid increase in public debt, as overall economic growth in China moderates compared to previous years.

The World Bank highlighted that one in seven young people in China is unemployed, and the country is facing challenges from technological disruptions and an aging population. Startups in China also contribute less to employment compared to those in the U.S., partly due to the presence of state-owned enterprises in China. A decline in China’s GDP could have a ripple effect on the rest of developing East Asia and the Pacific, with estimates suggesting that a 1% drop in China’s GDP could lower growth in the region by 0.3%.

In conclusion, the revised growth forecast for China and the East Asia-Pacific region is a positive sign amidst global economic uncertainties. The World Bank’s projections reflect a cautious optimism for China’s economic outlook, as the country navigates through various challenges while striving for sustainable growth.