UBS projects improved growth prospects for China as the effects of tariffs diminish. Analysts now suggest that the peak of the trade war impact has passed.

UBS forecasts China’s economy to expand between 3.7% to 4.0% in 2025. This marks an increase from their earlier prediction of 3.4% made last month.

Impact Of Revised Growth Forecast

What this means is fairly straightforward. UBS has lifted its expectations for China’s output next year, pointing to clearer skies ahead now that the worst of the trade-related disruption appears to be behind us. It signals that businesses operating in and around export-led sectors may begin to regain some footing, especially as the drag previously exerted by tariffs loses momentum. The modest upward revision from 3.4% to a range of 3.7% to 4.0% suggests they are not expecting a spectacular recovery, but they are confident enough to adjust their previous outlook.

Zhang and his team likely based the revision on easing international tensions, along with an uptick in domestic policy response aimed at supporting producers and consumption. Their improved forecast implies that demand from abroad may be recovering in tandem with renewed confidence among Chinese manufacturers. In this context, we can infer that liquidity conditions could continue improving under relatively stable monetary settings.

For those of us observing shorter-term market flows, there’s something to be read between the lines. An improved growth trajectory often comes with firmer policy goals and quieter fiscal concerns, which tends to support steady yield expectations across sovereign notes. If someone is holding exposure to Chinese equity futures or interest rate swaps, the broader macro shift relayed here could justify either maintaining positions or beginning to rotate into more cyclical exposure—though this depends on the extent of pricing already reflected in those instruments.

Strategic Investment Considerations

Taking a cue from Gao’s revision, it would be reasonable to reassess duration profiles and implied vols across Asia-facing products, particularly where previous assumptions were built on a lower GDP path. The improved forecast does not suggest runaway momentum, but it does imply more oxygen for risk sentiment than anticipated even four weeks ago.

The team’s forecast arrives with a level of detail that points to more confidence in domestic resilience, perhaps more than overseas investors have been expecting. It also acknowledges that the pain from earlier protectionist measures was real but has largely now bled out of forward-looking data.

For positioning in the weeks ahead, we see the logic in leaning slightly towards trades that benefit from medium-term policy traction rather than short bursts of stimulus. Those still pricing in aggressive downside to growth may want to revisit those views, especially while volatility across regional FX and commodities remains comparatively subdued.

The upgrade itself might seem modest, but given the source and timing, it carries weight for those who trade on nuanced shifts in macro direction.

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