Citi China Economy: On Track to Hit 5% Growth But Remains K-Shaped – Dec/Q4 Data Preview

Citi believes the Chinese economy is on track to achieve its 5% growth target for 2025, bolstered by a recent beat in manufacturing PMI data, a forecast the firm has maintained since June. However, the recovery remains distinctly K-shaped, characterized by resilient exports but sluggish domestic demand. For the fourth quarter, Citi projects GDP growth of 4.6% year-on-year, with improving month-end indicators. Industrial production likely accelerated to 5.6% in December, supported by new economy strength and a warmer winter benefiting construction activity.

Conversely, domestic consumption remains weak. Retail sales are estimated at a mere 1.0% growth, significantly dragged down by falling automobile sales. Full-year fixed asset investment may have contracted by 2.8%, marking the first decline since 1992, though capital expenditure and infrastructure show signs of stabilization. Trade data paints a brighter picture, with December exports growing 2.0% and full-year trade surplus reaching $1.18 trillion. On inflation, CPI is expected to tick up to 0.8% supported by food prices, while PPI remains at -2.1%. Credit data is projected to be moderate, with new RMB loans at roughly 1 trillion yuan and aggregate social financing at 2.2 trillion yuan, as policy transmission tools begin to function despite ongoing property sector headwinds. M2 growth should stabilize at 8.0%.