Insights 
VT 
China’s economy showed resilience in April despite US tariffs. Industrial production (IP) remained steady with continued frontloading in other markets after a temporary pause in US tariffs.
Retail sales and the property market experienced a downturn in April, with weaker-than-expected figures for retail sales and urban fixed assets investment (FAI). However, month-on-month momentum held positive, and surveyed jobless rates decreased slightly. Property indicators like home prices and sales showed a decline.
Revised 2025 Gdp Growth Forecast
Considering the short-term effects of the US-China trade truce, the GDP growth forecast for China in 2025 is revised to 4.6% from 4.3%. Predictions for the second quarter of 2025 suggest a growth rate of 4.9% year-on-year, with a forecast of 4.2% in the latter half. The outlook depends on a stable trade agreement between the US and China.
An interest rate cut of 0.1%-point is expected in the fourth quarter of 2025. Projections indicate the 7-day reverse repo rate, 1Y LPR, and 5Y LPR will be at 1.30%, 2.90%, and 3.40% respectively by end-4Q25.
Industrial production in April managed to hold its ground, bolstered by early shipments to markets outside the United States. This frontloading activity came after a short pause in tariffs, which had ripple effects across key export sectors. While overall output remained stable, momentum clearly shifted from US-facing sectors to those aligned with regions unaffected by tariff pressure. That substitution effect helped cushion what might have otherwise been a sharper slowdown. Traders focusing on macro-sensitive instruments would do well to recognise this reallocation of trade flow and the knock-on effects it could have on manufacturing-linked contracts.
Retail sales, by contrast, dipped more sharply than most had pencilled in, coming in weaker than the monthly trend would suggest. The property market compounded these concerns. Prices nudged lower, and transaction activity softened, especially in tier-two and tier-three cities. Urban fixed asset investment also undershot expectations, indicating that private developers and local governments alike are still holding back. Despite these setbacks, we saw a small improvement in the national jobless rate—a modest but positive counterbalance. That low-level shift in confidence may not fully offset the drag from slowing property demand, but it prevents further slippage—for now.
Policy Expectations And Impact
The GDP growth target for next year has been adjusted upwards, from 4.3% to 4.6%, based on current assumptions of a steady trade arrangement with the United States. We’re expecting a higher print in the second quarter—around 4.9% year-on-year—before activity begins to slow again towards the back half of 2025. That said, risks remain tilted toward any abrupt change in trade policy or a resurgence of property sector weakness. With those in mind, pricing for contracts tied to high-frequency growth indicators should be more attentive to headline release timing over the coming weeks.
On the policy front, the expectation for a small interest rate cut in late 2025 reflects a blend of cautious optimism and targeted support. Projections for the 7-day reverse repo rate, along with the main 1-year and 5-year loan prime rates, carry a clear message: directional easing, but in measured steps. These levels—1.30%, 2.90%, and 3.40%, respectively—serve as reference points for the funding environment traders will be operating in through year-end. As we assess the slope of the yield curve and the pricing of near-term liquidity instruments, these rates help define the boundaries for short-dated swaps and repo-linked strategies.
