China’s economy to slow as global growth stays solid, US think tank report says

A new outlook from the Peterson Institute for International Economics (PIIE) predicts that China's economic growth will slow further next year as export strength wanes and weak domestic demand continues, despite a resilient global economy. The Washington-based think tank anticipates China's GDP to expand by 4.6 percent this year and 4.3 percent in 2027, a decline from the 5 percent growth experienced in 2025.

Overcapacity and the property slump are cited as factors weighing on domestic demand, while export strength is expected to fade. Karen Dynan, a senior fellow at PIIE and former top US Treasury official, highlighted a further slowdown in aggregate demand during a presentation at the institute's event in Washington. The PIIE's latest 2026 forecast is marginally higher than the 4.5 percent growth projected in April, while the 2027 forecast remains unchanged.

However, Dynan anticipates the fading Chinese export boom due to increasing trade restrictions, which are primarily supporting the economy. She noted that China has benefited from exporting goods that fuel the global AI buildout. The forecast aligns with official data from China's National Bureau of Statistics, which recorded China's GDP growth at 5 percent year-on-year in the first quarter, surpassing market expectations.

Nevertheless, growth decelerated to 4.3 percent in the second quarter, marking the slowest quarterly expansion since late 2022. The global growth outlook, titled "Global Growth Remains Solid in a Challenging Environment," projects the world economy to expand by 3.2 percent this year and 3.1 percent next year, even amid the Iran war and energy price uncertainty.

Dynan expects the US Federal Reserve to raise interest rates three more times in the coming months due to inflation concerns. In the US, Dynan highlighted the ongoing AI boom, forecasting a 2.3 percent GDP growth this year and 2.2 percent in 2027. She also mentioned that chip exports and fiscal expansion would bolster Japan's growth.

Despite the slower growth outlook, China's President Xi Jinping and state media have emphasized confidence in the economy's resilience. Xi stated that China's economy has advanced under pressure and shifted towards new drivers and higher-quality growth, demonstrating strong resilience and vitality at his annual National Day address.