What's Happening?
China achieved a 5% GDP growth in 2025, primarily driven by strong export performance. However, analysts from Westpac warn that to maintain this growth rate in 2026, China must shift its focus towards boosting domestic demand and stabilizing the housing
market. The report highlights that while export gains to Asia, Europe, and Latin America have offset U.S. trade pressures, the sustainability of this growth is questionable. The Chinese economy's reliance on net exports and industrial investment has increased, necessitating a policy shift to prevent a structural slowdown. The report suggests that without a revival in private consumption and related business investment, regional fiscal capacity will remain constrained.
Why It's Important?
The call for a proactive policy shift in China is significant for global economic stakeholders, including the U.S. A stable Chinese economy can influence global trade dynamics, impacting U.S. businesses that rely on Chinese markets. The emphasis on domestic demand and housing stabilization could lead to increased Chinese imports, benefiting U.S. exporters. Conversely, failure to adapt could result in a slowdown, affecting global supply chains and economic stability. The report underscores the need for policy resolve to unlock pent-up demand, which could have ripple effects on international markets.
What's Next?
China's policymakers are expected to consider measures to stimulate household consumption and stabilize the housing market. This could involve fiscal policies aimed at boosting consumer confidence and investment in housing. The international community, including U.S. businesses and investors, will be closely monitoring these developments, as they could influence global economic trends and trade relations. The potential for a credible central government stimulus could quickly unlock demand, broadening economic activity across sectors and regions.
