BNP Paribas analysts forecast China’s GDP growth at 5.0% in 2025, the same as in 2024. They expect growth to slow moderately in 2026 as domestic demand weakens and stress in the property sector continues.
They expect fiscal and monetary policy to stay supportive in 2025 and 2026. They also expect policymakers to remain cautious while aiming to strengthen private consumption.
Near Term Export Outlook
In the near term, they expect Chinese exports to stay competitive. They also project that exports will face new protectionist measures.
They report that deflationary pressures persist. They expect only slight easing of these pressures in 2026.
The expected moderate slowdown in 2026, after we saw 5.0% growth in 2025, suggests a more defensive posture is needed. With recent data from China’s National Bureau of Statistics showing January 2026 manufacturing PMI at a contractionary 49.2, the cooling trend is already visible. Traders should consider buying put options on broad Chinese equity indices like the FTSE A50 to hedge against a potential downturn.
Persistent deflationary pressures remain a major factor for the coming weeks. The latest official report showed that the Consumer Price Index (CPI) for January 2026 fell by 0.6% year-over-year, marking the fourth straight month of declines. This environment could weaken the yuan, making call options on the USD/CNH pair an interesting play on continued currency depreciation.
Policy Signals And Market Volatility
We see that authorities are maintaining supportive but cautious policies, which limits the chance of a massive, market-moving stimulus. The People’s Bank of China’s decision last week to hold its key lending rate steady, despite the weak inflation data, confirms this hesitant approach. This uncertainty between slowing growth and reserved policy could increase market swings, making volatility plays like straddles on the Hang Seng China Enterprises Index attractive.
The export sector faces growing headwinds from new protectionist measures. After the targeted tariffs we saw on electric vehicles last year, reports this month indicate the EU is launching a new anti-subsidy probe into Chinese wind turbines. This suggests traders could look at purchasing puts on specific export-oriented industrial ETFs that are heavily exposed to European markets.
Stress in the property sector continues to drag on domestic demand. Data from early February 2026 shows new home sales by the top 100 developers plunged over 30% from a year ago, showing the problem is not resolved. Bearish positions, such as selling call spreads on real estate-focused ETFs, could be a way to capitalize on this ongoing weakness.
