1Q26_ Quarterly Outlook Report_Final_EN - Flipbook - Page 78
T H E P LUMB LI N E | A RETU RN TO F I RS T PRI N CI PL ES
CHINA
Derek Holt Vice
President, Scotiabank
Economics
Walid Khalid
Director, Investment
Strategy
Latest
2025f
2026f
2027f
GDP Growth
5.2%
4.8%
4.4%
4.1%
Inflation
0.7%
0.0%
0.7%
1.1%
Unemployment
5.1%
5.2%
5.1%
5.1%
Budget Bal.
-4.8%
-5.8%
-5.8%
-6.6%
Latest
2025
1-yr fwd
2-yr fwd
3-mo yield
1.3%
1.3%
1.4%
1.4%
10-yr yield
1.9%
1.9%
2.0%
2.1%
Yield curve slope
0.6%
0.6%
0.6%
0.7%
Source: Bloomberg Finance LP, Scotiabank Economics, Scotia Wealth Management. "Latest" values are as at December 31, 2025 and, for data other than bond
yields, pertain to the most recent monthly, quarterly, or annual reading available on this date. GDP and inflation forecasts are based on Scotiabank Economics
forecasts dated December 11, 2025. Remaining forecasts are based on median consensus estimate compiled by Bloomberg | 2025 inflation and unemployment
are based on the average YoY rates for each month of the year. | 2025 yields are as at December 31, 2025. Forward periods are relative to December 31, 2025 and
are based on forward market pricing.
Key conclusions
•
Growth is on track to achieving the annual target of around 5%, though the path ahead
will likely get more difficult. We expect low- to mid-4% annual real GDP growth over the
next couple of years.
•
Domestic demand conditions remain challenged, underscored by weak retail sales,
slumping investment, and subdued household and corporate credit demand. These
factors are being offset by healthy, albeit below trend, industrial production growth.
•
Domestic challenges are being mitigated through strong external demand from non-U.S.
economies, as a weak yuan and price cuts have buoyed exports, allowing China to amass
a $1 trillion global trade surplus through November 2025 despite rising U.S.
protectionism.
•
Officials have taken a piecemeal approach to policy easing, having left key rates
unchanged since May 2025. Economic weakness will likely prompt additional fiscal and
monetary policy support in 2026.
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