China
Export Boom, Consumer Crisis
Since the central bank is expected to keep interest rates low and Beijing is implementing targeted fiscal support measures for government infrastructure projects, it is advisable to underweight traditional Chinese consumer stocks in the portfolio while simultaneously overweighting technology leaders in the technology, green tech, and automation sectors.
By mid-2026, the Chinese economy will show a marked divergence, with real economic growth experiencing a structural slowdown. Following a rate of approximately 5.00% in the previous year, international institutions are forecasting GDP growth of 4.40% to 4.80% for the full year. This keeps the country just at the lower end of the government’s official target range. A significant divergence is evident in prices: The producer price index rose to its highest level in nearly four years due to factors related to the war and supply chain disruptions. Consumer prices, however, remained unchanged at 1.20%. Liquidity in the Chinese economy remains high, and foreign exchange reserves reached a multi-year high of 3.44 trillion U.S. dollars. Nevertheless, the limited scope for passing on price increases in the domestic market is significantly eroding margins in traditional retail. The export-oriented high-tech sector and industrial production are thriving despite Western tariffs and are able to offset the pressure through record exports to the Global South. Domestic consumption, on the other hand, remains mired in a deep crisis.
The main challenges stem from the ongoing weakness of China’s consumer goods and real estate sectors. The unsettled middle class is increasingly allocating its capital to defensive savings rather than consumption, as illustrated by the sharp slowdown in sales growth during the flagship “618 Shopping Festival.” In contrast, the advanced manufacturing sector is proving highly resilient in key technologies such as wind turbines, industrial robots, and e-mobility, and is posting record global trade surpluses.
IMF Forecasts
GDP 2026: 4.50%
Inflation 2026: 1.20%
Shibor: 1.43%
As of June 24, 2026