World Bank Lifts China Growth Forecast to 4.8% Despite Trade Tensions

Revised Outlook: World Bank Boosts China Forecast

The World Bank has revised its 2025 GDP growth estimate for China upward, raising it to 4.8 % from an earlier projection of 4.0 %. This decision reflects signs of resilience in China’s short-term economic data, even as the broader region faces headwinds from trade pressures and policy uncertainty.

However, the Bank also warns of a slowdown in 2026, projecting growth of roughly 4.2 %, largely due to weaker export demand and constraints on expansionary fiscal stimulus amid rising public debt.

Why the Revision? Key Drivers & Risks

Domestic Resilience Amid Global Strain

China’s recent data, especially in manufacturing and retail, has surprised on the upside, prompting the World Bank to reconsider its earlier pessimism. The forecast upgrade suggests China has absorbed external shocks better than expected.

Yet export growth is tepid, and business confidence remains soft. Elevated trade barriers and global economic uncertainty are weighing on long-term investment.

Constraints on Policy Firepower

While the Chinese government has tools to stimulate growth, the report notes these are becoming more constrained. Rising debt levels, limited fiscal space, and the risk of over-extension mean stimulus may be less potent in 2026.

Hence, while short-term dynamics support the revised forecast, the Bank emphasizes structural reforms over short-term fiscal pushes to ensure sustainable development.

Regional Ripples & Global Frictions

The broader East Asia & Pacific region also saw an upward revision: growth is now expected at 4.4 % in 2025 (up 0.2 pp), though the 2026 forecast remains at 4.5 %.

Regional risk remains high, political instability in Thailand, Indonesia, and other economies, coupled with weak export demand and trade policy unpredictability, creates a fragile backdrop.

Implications for Investors & Markets

China-Centric Plays

The upgraded growth outlook may provide renewed confidence in China-focused equities, especially in sectors tied to consumption, infrastructure, semiconductors, and domestic technology.

Exporters & Trade Channels

Even though export growth is soft, the revision may ease fears of a steep contraction in trade. Companies exposed to supply chains in Asia may benefit from stability in Chinese demand.

Policy and Currency Signals

The forecast adjustment could inform expectations about Chinese government intervention, monetary policy tweaks, or managed stimulus efforts. It may also affect the yuan’s trajectory, especially in the context of external pressure from trade tensions.

Risk of Overheating & Capital Flows

Improved prospects may attract capital inflows, increasing risk of asset bubbles, debt stress, or overheating in property or credit sectors. Observers will be watching whether capital controls or macroprudential measures tighten.

The Bigger Picture: Growth Amid Tension

China’s upgraded World Bank China forecast to 4.8 % underscores confidence in its resilience, but it is not a guarantee of momentum. Exports remain fragile, and the scope for stimulus is narrowing.

As global trade friction intensifies, China’s growth narrative will depend increasingly on domestic demand, reform, and policy finesse. This revised forecast is a statement of optimism, but also a reminder of the delicate balance ahead.