Real GDP growth that is more than 5.0% by 2025. Challenges lie ahead as that same year’s third quarter is poised to post a paltry 4.8% year-on-year growth rate. Our nation now finds itself in the midst of a new set of uncertainties as the US-China trade war continues to rage on. In turn, there is a deep pledge to keep monetary policy accommodative.
Yet in October, the government held the one-year (1Y) and five-year (5Y) Loan Prime Rate (LPR) fixings steady. This decision shows their hawkishness on managing the economy. According to UOB Group’s FX analysts Quek Ser Leang and Peter Chia, “The 1Y and 5Y LPR fixings were unchanged in Oct. Monetary policy will be kept accommodative amid the renewed uncertainties from the US-China trade war.”
China is facing increasing internal growth disparities that are raising alarms among economists. With industrial production and exports both cooling, fears of a more abrupt economic slowdown are increasing. These three factors combine to create an environment clear for a cut. As a first move, a 50bp cut to the Banks’ Reserve Requirement Ratio (RRR) is in the cards.
The fourth quarter of 2025 is a long way off and will require an aggressively high annualized growth rate of 4.5%. This target is important for achieving the ambitious overall 6.0 percent GDP growth forecast. Looking forward, economic forecasts for 2026 already indicate a drop to 4.2%. Analysts are quick to add that this is likely the moment when the effects of US tariffs on China’s economy will be felt most greatly.
UOB Group’s analysts noted that “there is much more to be done for consumption, and this will be a priority for policymakers.” This quote highlights the internal and external pressures China is facing that will force their hand to find a more sustainable economic growth model.
Key negotiations over the 15th five-year plan for 2026-2030 could occur during a Fourth Plenary Session of the Central Committee slated for October 20-23. We will have to wait for further details to be unveiled at the NPC (National People’s Congress) in March 2026. These conversations, both formal and informal, are likely to have a critical impact on how China develops its economic agenda in the years ahead.