China’s growth faces headwinds from US tariffs and real estate woes, says UBS By Investing.com
Investing.com– China’s economic growth is expected to slow to 4.0% in 2025 as it faces a potential U.S. tariff hike and ongoing challenges in the real estate sector, according to a research note from UBS.
The tariffs, which are expected to be announced in the first quarter and implemented in phases starting in the third quarter, are forecast to reduce China’s GDP growth by more than 150 basis points through weaker exports and manufacturing investment, said analysts at UBS- and in the note.
While the real estate sector remains under pressure, UBS predicts a smaller decline in sales and investment compared to previous years.
Recent policy easing, including lower mortgage rates and urban renewal initiatives, has had some effect, particularly in big cities. However, elevated inventory levels and tepid household sentiment continue to weigh on the market, and stabilization across the country is not expected before 2026, the analysts wrote.
In response to these challenges, UBS foresees increased fiscal and monetary policy support. The government is likely to announce measures during the National People’s Congress meeting in March, including a higher fiscal deficit target of around 4% of GDP and the issuance of special government bonds.
UBS also expects an interest rate cut of 30-40 basis points in 2025 and further easing in 2026.
Lingering deflationary pressures, with core consumer inflation hovering around 0%, add to concerns about the economy. It is expected to fall modestly to 7.6 against the U.S. dollar by the end of 2025 due to the impact of tariffs and a wide yield spread between the U.S. and China, according to UBS.
UBS points to the possibility of surprises, including stronger-than-expected US economic growth or a faster recovery in the housing market, which could change China’s outlook. However, uncertainties surrounding global trade and the effectiveness of domestic policies remain significant obstacles to sustainable growth.
