Global Macro Research
China Can China stay on target?
China delivered another year of 5% GDP growth, shrugging off Trump’s “liberation day” shock and generating a record-high trade surplus. The PBOC now appears more comfortable allowing a currency appreciation, despite the risks of embedding deflation. Policy easing reduces the risk that growth slows materially in 2026.
Authors
Robert Gilhooly
Senior Emerging Markets Economist
Michael Langham
Emerging Markets Economist
Duration: 1 Min
Date: 22 de jan. de 2026
Key Takeaways
- In 2025, for the second year in a row, net trade was the main driver of growth, helping to offset a weaker contribution to GDP from investment.
- While firms cut prices to support exports – and a potentially deeply negative investment deflator supported real GDP – household spending on services was the unsung hero.
- Household balance sheets continue to be hit by a wealth effect from falling property prices, which accelerated in December, while declining property income is also a drag. Larger transfers from the government have provided a small offset, but wages and salary growth and ample savings largely explain spending in the face of adversity.
The record $1.2 trillion trade surplus has made the People’s Bank of China (PBOC) more comfortable about a stronger currency. But, as well as questions about the rest of the world’s tolerance for China to further expand its share of global trade, there are risks that this embeds deflation, particularly while excess capacity remains.
Reinforcing expectations of currency appreciation should at least encourage foreign investors to reconsider their China exposure, even if the authorities’ preference for a “slow bull market” in equities may also temper enthusiasm.
