JP MORGAN CHASE(US:JPM)2025-07-01 00:40Investment Rating - The report maintains a full-year GDP growth forecast for China at 4.8% [5][6]. Core Insights - The report emphasizes three main themes in China's economic outlook: external uncertainty due to trade war risks, counter-cyclical economic policies to stabilize growth, and a reassessment of China's innovation capabilities [3][4]. - Economic activity showed strong growth in the first quarter of 2025, with real GDP expanding by 5.4% year-on-year, but is expected to slow down in subsequent quarters due to trade tensions and domestic challenges [4][5]. - The report highlights a significant decline in exports to the US, with a 25% month-on-month seasonally adjusted drop in April and a further 15% in May, while exports to non-US markets remained robust [9][4]. Economic Indicators - Real GDP growth is projected to slow to 3.5% in Q2, 3% in Q3, and 2.5% in Q4 of 2025, with a full-year forecast of 4.8% [5][6]. - Key economic indicators for 2023-2025 include: - Real GDP growth: 5.2% (2018-2022 average), 5.0% (2024), 4.8% (2025 forecast) - Consumption growth: 4.4% (2023), 2.2% (2024), 2.8% (2025) - Merchandise trade balance: US$594 billion (2023), US$767 billion (2024), US$829 billion (2025) [6]. - The report notes a high augmented fiscal deficit of 12.6% of GDP for 2025, indicating limited room for additional fiscal easing [37][34]. Trade Dynamics - The report discusses the impact of tariff dynamics, noting that while peak tariffs have passed, uncertainties remain, with potential for both tariff reductions and increases [7][8]. - China's exports are expected to face challenges from high US tariffs, but the trade surplus is projected to reach a new record high, with net exports contributing approximately 0.6 percentage points to GDP growth [13][9]. Domestic Economic Performance - The report indicates divergent domestic economic performance, with industrial production growth outpacing consumption growth, and high-tech sectors outperforming traditional sectors [16]. - Housing market weakness has re-emerged despite previous policy relaxations, with expectations of continued correction in 2025 [20][18]. - The success of new economy innovations, such as DeepSeek, is highlighted as a potential driver for economic recovery and private investment [24][25]. Policy Outlook - Fiscal and monetary policies are expected to remain accommodative but data-dependent, with low expectations for additional stimulus packages in the near term [34][37]. - The report emphasizes the importance of upcoming key events, including US-China trade negotiations and domestic policy meetings, which will shape the economic outlook for the second half of 2025 [39][40].