China Economic Update: Advancing Reforms, Enhancing Prospects

Overview & Synopsis

China’s economy maintained solid momentum in the third quarter of 2025, supported by accommodative policies that bolstered domestic consumption and investment, and by demand from developing countries that sustained exports. Growth is estimated at 4.9 percent in 2025 and projected at 4.4 percent in 2026 as existing headwinds are expected to persist. Recent fiscal measures, alongside some stability in global trade policy, are expected to support investment and exports. The country’s policy priority is to strengthen domestic demand amid uncertainty in the external environment while addressing structural headwinds that weigh on growth. The Economic Update also explores the link between high savings and household consumption behavior. Almost half of household savings in China are invested in housing and about a quarter in bank deposits. The preference for low-risk bank deposits is shaped by precautionary saving needs, limited long-term financial products, and, more recently, falling home prices and cautious income expectations. Large volumes of household deposits provide low-cost financing but they may also weaken price signals, leading to patterns of capital allocation that may not support productivity trends.