16 July 2025
Tariff turbulence with the US has dominated the headlines. While we see two sided-risks on US-China trade from ongoing negotiations, China’s trade-weighted tariff on exports to the US remains at around 50%, including the c20% in place before Trump 2.0. But despite the steep tariff hike, recent trade data has been holding up, as front-loading and trade restructuring have helped to offset the impact. Domestic economic data has also been relatively firm.
While some downside risks have moderated, we still see pressures on growth. Externally, it’s uncertain whether the US and China can strike a deal before 14 August, the end of the 90-day tariff pause agreed during the Geneva talks. Domestically, over 12 million university graduates this year will add pressure to the labour market, while certain industries are consolidating. Consumption continues to recover, but ongoing property sector weakness lingers.
We expect China to roll out pro-growth measures already in the pipeline, though a ‘bazooka’ stimulus seems unlikely. With policymakers favouring structural solutions for structural issues, support is likely to be directed at stimulating consumption and stabilising the job market. Consumption policies are focussing on near-term measures, such as subsidies for durables, and long-term stimulus, such as through expansion of social safety nets and pension reforms.
Though still a concern, the housing market no longer appears to be the government’s primary policy focus. So long as the situation remains manageable, we don’t expect ‘bazooka’-style measures to be introduced. Most recently, the Central Urban Work Conference was held from 14-15 July, and emphasized a new urbanisation model, which could involve more urban village renovations as well as development of city clusters. Meanwhile, implementation of announced measures continues, for example, with Zhejiang province recently saying that it would use special local government bonds to purchase commodity housing. However, the subdued national trend may have masked a significant dichotomy in the recovery – large cities with population inflows are exhibiting faster rebounds.
The Outline of the 15th Five-Year Plan will likely to be released in Q4 2025. The emphasis will be on facilitating China’s long-term transition towards higher-quality growth, likely echoing the areas we already see policy pivoting towards in recent years, including frontier technology fields, new forms of consumption, and green development.
Source: Wind, HSBC
Source: Wind, HSBC
Source: LSEG Eikon
* Past performance is not an indication of future returns
Source: LSEG Eikon. As of 14 July 2025 market close
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