Global Investment Banks Adjust China's Growth Forecast After US Trade Deal

2025-05-14 global

Beijing, Wednesday, 14 May 2025.
Investment banks are revising China’s growth projections after a US trade deal temporarily reduces tariffs, potentially boosting China’s 2025 GDP growth to over 4%.

Introduction of Trade Deal and Economic Impacts

On May 12, 2025, the United States and China reached a pivotal trade agreement to mitigate ongoing economic tensions. The deal is designed to temporarily reduce tariffs, with U.S. tariffs on Chinese products lowered from 145% to 30%, and Chinese tariffs on U.S. goods decreased from 125% to 10% [1][2]. This development comes after a protracted period of elevated tariffs that had been implemented in April 2025 amid escalating trade disagreements [3].

Revision of Economic Growth Projections

Following the announcement of the trade ceasefire, several major global investment banks have revised upward their forecasts for China’s GDP growth in 2025. Institutions such as UBS, ANZ Bank, and Morgan Stanley have adjusted their projections, anticipating China’s economy could exceed previously conservative growth estimates [1][4]. For instance, UBS now expects China’s GDP growth to range between 3.7% and 4%, an increase from an earlier forecast of 3.4% [1]. Meanwhile, ANZ Bank anticipates growth could surpass their initial projection of 4.2% [4].

Stock Market Reactions and Strategic Positioning

The financial markets have responded dynamically to the trade developments, with stock indices experiencing marked shifts. On May 12, 2025, the CSI 300 index in China rose by 1.6%, while the Hang Seng Index in Hong Kong increased by nearly 3% before experiencing a slight decline the following day [3][5]. These movements reflect optimism and readjustments by investors who are rotating assets to capitalize on China’s improved economic outlook [1][2]. Notably, Nomura has shifted its investment strategy by increasing holdings in Chinese equities while reducing positions in Indian stocks [1].

Prospects for Future Trade Relationships

Despite the promising temporary reduction in tariffs, experts caution that it is not indicative of a permanent resolution to the underlying trade tensions between the U.S. and China. The 90-day tariff reduction period is seen as a window of opportunity for both nations to negotiate deeper diplomatic ties and long-term agreements. However, some analysts remain skeptical about the permanence of these changes, citing mutual distrust and the complex backdrop of previous trade negotiations [2][6]. Furthermore, financial markets are closely watching anticipated CPI data from the U.S. to gauge the full economic impact of the trade détente on both economies [7].

Sources

China growth investment outlook