People’s Republic of China

The 2025 Article IV Consultation discusses that the Chinese economy has remained remarkably resilient despite facing multiple shocks in recent years. Gross domestic product (GDP) growth is projected to slow to 4.5 percent in 2026, reflecting the prolonged effects of tariffs and trade policy uncertainty. Deflationary pressures are expected to persist, with inflation projected to rise only gradually amid continued economic slack. Over the medium term, growth is projected to continue decelerating due to a declining labor force, decreasing returns to investment, and slower productivity growth. Risks around the outlook remain tilted to the downside. The main domestic risk is a deeper than-expected contraction in the property sector, which, combined with high debt levels, could contribute to greater domestic demand weakness, entrenched deflation, and continued reliance on exports. Renewed escalation of trade tensions is the key external downside risk. Additional policy stimulus or cooperative resolution of trade tensions pose upside risks.