China outlook Q1 2025
China’s economy expected to grow in 2025

As China looks to rebound from a slower 2024, its economy is set to grow by 5% in 2025, bolstered by strong stimulus measures and strategic shifts in policy.
The government is pursuing a mix of monetary easing and expansive fiscal policies to stimulate growth, which is expected to boost Chinese equities and key sectors of the economy.
While the tech sector holds significant promise with government-led initiatives and growing global partnerships, it also faces notable challenges, including geopolitical tensions and increasing competition from the U.S.
Strong stimulus measures to boost economy
China is implementing bold strategies to enhance its economic performance in 2025 after experiencing slower growth in 2024. The Chinese Politburo, which significantly influences the policies of the People’s Bank of China (PBoC), has announced a move towards a moderately loose monetary policy. This is a clear change from the prudential approach maintained since 2011, suggesting that investors should anticipate more interest rate reductions this year.
In addition to these monetary adjustments, there are expectations for cuts in reserve requirements and further fiscal stimulus, as indicated by Han Wenxiu, the deputy director of the Central Financial and Economic Affairs Commission. The government plans to issue special treasury and local bonds, potentially inflating the annual budget deficit to around 13 trillion yuan, which could represent 9-10% of China's GDP. This expansive fiscal policy is likely to put downward pressure on the yuan relative to the U.S. dollar.
Chinese equities set for strong growth in Q1
Equities in China are poised for a strong rally in Q1 2025, following a bullish year for the China A50 and Hang Seng 50 indices, which posted gains of 17% and 19% in 2024. With many tech stocks in the U.S. reaching near all-time highs, investors seeking better value might shift their focus to Chinese equities, attracted by an accommodative monetary policy, low inflation, and both fiscal and monetary support.
With expectations of fiscal stimulus aimed at boosting domestic consumption, consumer discretionary sectors could see significant growth. This includes e-commerce giants like Alibaba, JD.com, and Pinduoduo, which can benefit from increased consumer spending and AI adoption. The sector might also be positively influenced by a recovering property market, which could indirectly boost consumer confidence and spending.
Rising potential in China’s healthcare and biotech sectors
Despite some areas showing weakness, the healthcare sector remains a bright spot. With an aging population and increasing domestic demand, China's healthcare sector is positioned for growth. The government’s focus on health innovation, along with the push to reduce reliance on foreign medical supplies, is boosting domestic players. The sector is also seeing growth from the biotech space, where companies are advancing in areas like pharmaceuticals and medical devices.
As China continues to advance in areas like biotech, the potential for growth within this sector appears significant, especially in response to domestic healthcare needs and government incentives.
Tech sector facing challenges and opportunities
China’s tech sector continues to evolve rapidly, supported especially by government initiatives. As the country strives to become a global leader in high-tech industries, several opportunities and challenges are shaping the sector's trajectory.
The "Made in China 2025" (MIC 2025) plan, unveiled by the Chinese government in 2015, is a strategic initiative designed to transition China from a low-cost manufacturing base to a global leader in high-tech industries. Significant progress has already been made under this framework, with China emerging as a leader in electric vehicle (EV) production, the development of semiconductor technologies like the SMIC 7-nm microchip, and other technological advancements.
Another opportunity for China’s tech sector lies in the recent expansion of the BRICS group, which has welcomed new members such as Ethiopia, Argentina, Indonesia, Egypt, Iran, Saudi Arabia, and the UAE. This expansion could provide Chinese manufacturers and tech firms with alternative markets, as China strengthens its economic ties with these nations. We anticipate an increase in bilateral agreements within the BRICS nations, particularly with energy-rich countries like Saudi Arabia, Iran, and the UAE, aiming to solidify energy partnerships with China.
However, the Chinese tech industry also faces substantial challenges. U.S. President-elect Donald Trump’s proposed increase in sanctions poses a significant threat to the sector. Additionally, Chinese companies face direct competition from U.S. firms, while Western nations are enacting stricter regulations to limit China’s access to critical technologies. European protective policies also present hurdles, complicating efforts by Chinese companies to export technology to eurozone markets.