China’s established position as a global growth engine is facing significant challenges. A recent report from SBI Research reveals a stark forecast: the country’s GDP growth is anticipated to drop to 4% by 2025, a decrease from 5.3% just a year prior.
This report highlights a combination of longstanding and escalating issues—persistent real estate difficulties, low consumer confidence, and growing global obstacles such as increased protectionism and sluggish trade. Coupled with strained local government finances, the overall outlook appears more precarious.
“Consumer confidence in China has been declining since early 2022 and shows little indication of recovery,” the report states, emphasizing the persistent weakness in domestic demand despite efforts to stimulate it.
Another troubling indicator is the ongoing negative inflation, which implies that demand is so weak that prices are dropping. Global organizations, including the IMF and significant credit rating agencies, are becoming more cautious—some even caution that growth may fall below 4% if existing trends continue.
Adding to the complexity, global trade is projected to decelerate markedly in 2025, with volume growth expected to be only 1.7%, less than half of last year’s pace. This presents challenges for China, which has depended on robust exports to fuel its economic growth. However, due to rising tariffs, slowing global consumption, and strained supply chains, the external environment is less than favorable.
The slowdown affects more than just China. For India and other emerging markets, it presents a dual challenge. On one side, reduced demand from China is lowering commodity prices, aiding in inflation control. Conversely, the fallout could suppress exports and hinder foreign investment throughout Asia.
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First Published: Jun 2, 2025 3:07 PM IST
