China’s economy to slow as global growth stays solid, US think tank report says

The Washington-based think tank projects China’s GDP will grow 4.6 per cent this year and 4.3 per cent in 2027, down from 5 per cent growth in 2025, according to its semi-annual Global Economic Prospects report, released on Tuesday.

The report said overcapacity and the property slump are weighing on domestic demand while export strength is expected to fade.

Karen Dynan, a PIIE senior fellow and former top official at the US Treasury Department, presented the outlook at the institute’s event in Washington.

“China in particular, I’m looking for a further slowing of aggregate demand,” Dynan said. “It’s weak.”

4:52

How does China plan to dominate the global humanoid robot market?

PIIE’s latest 2026 forecast is slightly higher than the 4.5 per cent it projected in April, while its 2027 forecast is unchanged. But the tone has shifted as the spring report described Chinese exports as strong, with the property slump the main drag.

Dynan said she expects China’s export boom to fade as trade restrictions increase, removing a key support for an economy already weighed down by soft domestic demand.

She noted that China has benefited from exporting goods that support the global AI buildout. She declined to be more specific about the restrictions, saying the trade situation is too fluid.

China’s economy grew 5 per cent year on year in the first quarter, beating market expectations and keeping the country on track to meet its full-year growth target without near-term stimulus, analysts said.

However, economic growth slowed to 4.3 per cent in the second quarter, down from 5 per cent in the first quarter and marking the slowest quarterly expansion since late 2022.

Global growth ‘solid’

The report, titled “Global Growth Remains Solid in a Challenging Environment”, projects the world economy will grow 3.2 per cent this year and 3.1 per cent next year, despite the war with Iran and uncertainty over energy prices.

SCMP Plus is a new premium news platform that gives you an

all-inclusive edge to stay ahead on China news.

To access our exclusive content you’ll need to subscribe.

Already a subscriber?

LOG IN

“It’s fair to say that we are in a challenging environment right now, given the adverse events of the last couple of years, and yet global growth is holding up,” Dynan said.

She also predicted that the US Federal Reserve would raise interest rates three more times in the coming months amid inflation concerns.

In the US, she said the artificial intelligence boom would continue to propel growth, with GDP forecast to expand 2.3 per cent this year and 2.2 per cent in 2027. Chip exports and fiscal expansion are supporting Japan’s growth.

China set its growth target for this year at “4.5 to 5 per cent”, a slight shift from the “around 5 per cent” goal that had been the recent norm, as the economy grapples with weak domestic demand, a prolonged property downturn and rising external risks.

Despite the slowing outlook, President Xi Jinping and Chinese state media have stressed confidence in the economy’s resilience as China begins its 15th five-year plan from 2026-30.

“Our country’s economy has forged ahead under pressure, shifting towards new drivers and higher quality, and demonstrating strong resilience and vitality,” Xi said at his annual National Day address, according to state news agency Xinhua.