IMF upgrades China's growth forecast to 4.5%

The International Monetary Fund has raised its 2026 growth projection for China to 4.5 percent, up by 0.3 percentage point from its October forecast, primarily due to a combination of eased trade tensions and sustained domestic policy support, according to the organization's World Economic Outlook update released on Monday.

The improvement reflects the impact of lower effective United States tariff rates on Chinese goods, resulting from a yearlong trade truce agreed upon by the two sides in November, and the continued implementation of stimulus measures over a two-year period, according to the IMF.

The economy's growth rate is expected to decelerate to 4 percent in 2027 as "structural headwinds assert themselves", the IMF said.

The IMF also said that relative to the October projection, growth in 2025 for China was revised upward by 0.2 percentage point to 5 percent.

"The revision reflects stimulus measures and additional policy bank lending for investment," it said.

Also on Monday, China's National Bureau of Statistics announced that the country's gross domestic product reached a record $20.01 trillion last year, growing 5 percent.

Kang Yi, head of the NBS, said that China has rolled out more proactive and effective macro policies as it confronts sudden shifts in the external environment and growing domestic difficulties, helping to cushion external shocks and stabilize the foundation for development despite headwinds.

Kang also said that China has sustained one of the fastest growth rates among major economies and remains among the world's most stable and reliable engines of global expansion, with its contribution to global growth expected to be about 30 percent.

That resilience is mirrored in the broader picture.

Despite US-led trade disruptions and lingering uncertainty, new projections show global growth at 3.3 percent this year, slightly higher than the IMF's forecast in October, with much of the upgrade driven by the US and China.

That growth rate is the same as in 2025, but up from the 3.1 percent the IMF had forecast for 2026 back in October.

The IMF estimates US growth at 2.4 percent this year, 0.3 percentage point higher than its forecast in October, citing fiscal policy support, lower interest rates and the diminishing effects of higher trade barriers.

The resilience of global growth suggests that the world has "largely shaken off the immediate impact of the tariff shock", IMF chief economist Pierre-Olivier Gourinchas and his colleague Tobias Adrian wrote in a blog post accompanying the latest update to the World Economic Outlook.

They attributed the better-than-expected performance to a mix of easing trade tensions, bigger-than-expected fiscal support, supportive financial conditions and "the agility of the private sector" in working around disrupted trade flows.

They also pointed to stronger policy frameworks, particularly in emerging markets, as a buffer against shocks.

"Another key driver of this resilience is the continued surge in investment in the information technology sector, especially in artificial intelligence," their post said.

It noted that IT investment in the US as a share of economic output has climbed to "the highest level since 2001", lifting business spending even as manufacturing remains subdued.

While the boom is concentrated in the US, it is spilling across borders through demand for components and equipment, benefiting Asia's technology exports, according to the analysis.

Looking ahead, they outlined both upside and downside scenarios. AI could lift global activity by about 0.3 percent relative to the baseline if productivity gains materialize, but a moderate valuation correction paired with tighter financial conditions could cut global growth by about 0.4 percent, with larger losses possible "if real investment in technology sectors declines more sharply".