Growth Target at Risk Amid Weak Consumer Demand, Tariff Drag
China may need to ramp up fiscal stimulus in the coming months to meet its 5% economic growth goal for 2025, according to Barclays analysts. Although a temporary easing in US-China trade tensions has brought short-term relief, structural challenges continue to weigh on the country’s recovery.
Second-quarter data showed GDP grew by 5.2%, slightly beating forecasts but slipping from 5.4% in the previous quarter. Exports showed surprising resilience despite tariff pressures, but the broader economic picture remains clouded by weak domestic consumption and a prolonged real estate slump.
Beijing’s Policy Path Hinges on Key Meetings
With major uncertainties still looming, market watchers are eyeing the upcoming Politburo meeting in late July for signals of new economic policy. While Barclays believes stimulus is needed to stabilize momentum, the firm predicts any significant measures will likely be delayed until September or October, when China’s National People’s Congress standing committee convenes.
Policy support so far has been limited, despite Beijing’s intent to maintain its ambitious growth target. Real estate indicators have continued to deteriorate, while the export boost is expected to fade as global demand softens. Barclays noted that “growth momentum will slow down” without intervention.
Selective Opportunities for Global Investors
Barclays advised cautious optimism for investors seeking exposure to China, especially through select European equities. The firm highlighted that its China-sensitive stock basket has underperformed the Stoxx 600 this year and could benefit significantly from positive policy surprises.
Top picks include luxury brand Kering, watchmaker Swatch, automakers Volkswagen, Porsche, and BMW, as well as beverage giant Carlsberg. In the tech sector, Barclays pointed to semiconductor leaders ASML, STMicroelectronics, and Infineon as well-positioned for a potential Chinese rebound.
Tariffs Still a Key Risk Factor
Despite the recent pause in tit-for-tat trade actions between Washington and Beijing, elevated tariffs remain a structural drag on China’s economy. While export data temporarily improved, the long-term outlook remains uncertain if additional barriers resurface or global trade slows further.
Analysts warn that without stronger fiscal tools, including direct support for consumers and targeted real estate reforms, Beijing’s 5% growth target could slip out of reach. For now, all eyes remain on upcoming policy meetings to gauge China’s next move.