In the past month, foreign banks have collectively raised their economic expectations for China, with Morgan Stanley's Xing Ziqiang stating "the first quarter exceeds expectations."

Under the narrative of "the east rises while the west sets," foreign institutions have recently raised their expectations for China's economic growth.

On the 26th, the team led by Morgan Stanley's chief economist, Xing Ziqiang, pointed out in their latest research report that China's economic performance in the first quarter exceeded expectations, with strong investment momentum in new industries, prompting the team to raise their full-year economic growth forecast by 0.5 percentage points, approaching the market median.

In the past month, economists from HSBC, ANZ, and Citigroup have all raised their GDP forecasts for China. HSBC economists stated in a report last week:

"The government's determination to support growth has strengthened, and more vigorous and urgent policy responses to boost domestic consumption, along with better-than-expected economic activity data, are key reasons for our more constructive outlook on growth."

Morgan Stanley: First Quarter Exceeds Expectations, Raises Economic Forecast

Morgan Stanley noted in their research report that they have raised their forecast for China's economic growth rate in 2025, mainly based on two factors:

1. Strong Data Support in the First Quarter: Considering the strong economic data performance in January and February, the actual GDP year-on-year growth rate in the first quarter is expected to reach 5.4%, consistent with the fourth quarter of last year and higher than the 4.6% in the third quarter of last year. The actual economic momentum may be stronger than the data suggests, especially considering the factors of the Spring Festival and working days. The effects of policy support for consumption are gradually becoming evident. Supported by policies, mobile phone sales have surged, while the momentum in home appliance sales remains strong.
2. Growth in Emerging Industry Investment: With the implementation of AI and government funding support, investment in emerging industries has significantly increased the contribution of capital formation to GDP. This new momentum has become an important support for economic recovery.

Morgan Stanley believes that this trend may continue into the second quarter.

Outlook on Real Estate and Exchange Rates

Thanks to the maximum relaxation of purchase restrictions, housing transaction volumes in some cities have recently rebounded, housing prices have warmed, and pent-up demand has been released.

The report predicts that by 2026, as the impact of tariffs gradually fades, regional real estate markets stabilize, and social welfare reforms continue to advance, China will experience mild re-inflation.

Considering that stabilizing the exchange rate is currently a priority among the central bank's multiple policy goals, Morgan Stanley has raised its forecast for the RMB exchange rate; entering the second half of the year, the central bank may maintain a moderately loose liquidity environment.

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