Balancing act: China’s path through policy, property and trade
There’s much more to China than tariffs, as it navigates wider economic issues.
As a key driver of global economic activity and financial market dynamics, China warrants regular analysis to ensure an up-to-date understanding of its evolving macroeconomic landscape.
So, where do things stand currently? In this update, we explore the latest developments in China’s economy and equity markets.
A fragile peace in the trade war
Tariffs have dominated any talk of China this year, following President Donald Trump’s ‘Liberation Day’ in April, when he imposed sweeping tariffs on Chinese exports, triggering a tit-for-tat escalation. By June, the two countries had reached a tentative trade deal, though it still awaits formal approval from both leaders.
Economic growth amid headwinds
China has faced an array of economic problems for years, including a property crisis, high unemployment and low consumer spending. Yet the country reported full-year economic growth of 5% for 2024, meeting its official target and narrowly beating economists’ forecasts of 4.9%1.
The growth target remains unchanged for 2025 and was accompanied by a pledge to boost the economy via a raft of support measures. Plans include issuing close to $180bn in special treasury bonds to help fund stimulus measures; an increase in borrowing allowances for local governments; and an increase in the fiscal deficit by one percentage point to 4% of GDP – notably the highest level in decades2. To help tackle unemployment, the government plans to create over 12 million jobs in cities3.
The key question is whether these measures will be enough to boost consumption and help get the economy back on track. In Q1 2025, China reported an unexpectedly strong 5.4% GDP4 – but crucially, this was before the full force of the recent tariffs hit – and the full economic impact of the trade war with the US is yet to be seen. The country’s vast manufacturing sector has already been impacted, with many export orders cancelled and factory workers being furloughed as production levels are reduced.
Real estate recovery?
Real estate is a key sector within the Chinese economy. Recent years have seen negative investor sentiment towards a sector in crisis, sparked in 2021 by the default of Evergrande Group and other major property developers.
In late 2024, the government announced several supportive measures, such as reduced mortgage rates and lower deposit requirements for new home purchases. In 2025, efforts to stabilise the real estate market have continued, including fiscal incentives and a relaxation of homebuying restrictions.
Tentative signs of recovery have led analysts to upgrade their forecasts on the sector. However, the wider current environment of trade tariffs and global uncertainty may keep the sector under pressure for some time yet.
AI sparks a market revival
Chinese equities rallied in early 2025 as investors flocked to the nation’s tech firms in response to DeepSeek’s AI breakthrough, on optimism around the advancement of large language models (LLMs) in the country. This upswing was a welcome boost to China’s markets, following repeated challenges from the tariff tensions and deflationary pressures in the Chinese economy as outlined above.
Looking ahead
China’s economy and equity markets have shown encouraging signs of resilience, but meaningful challenges persist. The recent tariff truce with the US offers hope for easing trade tensions, though the full economic impact remains uncertain. As China navigates this complex and evolving landscape, vigilance from investors is essential. Closely monitoring China’s unique risks and opportunities remains key to informed decision-making.
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