Economic Stimulus Expected to Partially Offset Impact of US Tariffs
International credit rating agency Moody's has revised upward its forecast for China's real gross domestic product (GDP) growth rate next year from 4.0% to 4.2%, an increase of 0.2 percentage points.
On the 15th (local time), Moody's stated in a report that China's credit conditions are stabilizing and that efforts to stimulate the economy are expected to partially offset the impact of the U.S. tariff hikes.
Moody's analyzed that since the Chinese authorities supplied 1 trillion yuan (approximately 196 trillion won) of long-term liquidity to the market at the end of September, the successive measures such as stock market stabilization and real estate market stimulus policies are expected to partially mitigate the shock from potential U.S. tariff increases. The Chinese government and party held the Central Economic Work Conference on the 11th and 12th, declaring plans to expand fiscal spending and ease monetary policy to support economic recovery next year.
During the presidential campaign, then-candidate Trump pledged to impose a 60% tariff on Chinese imports, and at the end of last month, he announced that until issues such as fentanyl, known as the so-called 'zombie drug,' are resolved, an additional 10% tariff would be imposed on China.
In response, international credit rating agency Fitch on the 9th stated that "U.S. trade policy toward China will return to sharp protectionism," and downgraded China's growth forecast for next year from 4.5%, presented in September, to 4.3%. The Organisation for Economic Co-operation and Development (OECD) in its economic outlook report published on the 4th projected China's growth rates for 2025 and 2026 at 4.7% and 4.4%, respectively.
Meanwhile, on the same day, China's National Bureau of Statistics announced that retail sales in China last month increased by 3.0% year-on-year to 4.3763 trillion yuan. This figure is lower than the previous month's 4.8% and significantly below the forecasts of Reuters (4.6%) and Bloomberg (5.0%).
Julian Evans-Pritchard, head of China economics at Capital Economics, said, "We doubt whether the stimulus measures can bring more than a short-term improvement," adding, "If Trump begins to implement tariff hikes, the current strong export demand is unlikely to continue."
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