After the US and China reached a tariff agreement, foreign investment banks raised their expectations for China's economic growth

After the US and China reached a tariff agreement, several financial institutions have raised their economic forecasts for China.

According to the Ministry of Commerce, on the 12th, both the US and China canceled a total of 91% of the additional tariffs and suspended the implementation of 24% of the counter-tariffs. According to CICC's calculations, the US tax rate on China will drop from the previous 165% to 50%.

Morgan Stanley has raised its forecast for China's recent quarterly GDP, expecting companies to accelerate exports to take advantage of lower tariffs. The investment bank's analysts wrote in a report:

"Although tariffs remain high, the suspension window may lead to front-loading of shipments and production."

The bank's chief economist for China, Xing Ziqiang, and his team expect that China's GDP in the second quarter may exceed current estimates, and growth in the third quarter may show temporary resilience.

Investment Banks Raise China's Economic Growth Expectations

According to Shanghai Securities News, JPMorgan's chief economist for China and head of Greater China economic research, Zhu Haibin, has expressed updated views and adjusted the forecast for China's economic growth in 2025. Specifically, JPMorgan has raised its forecast for the annual GDP growth rate in 2025 and increased the GDP growth rate (quarter-on-quarter annualized growth rate) for China in the second to fourth quarters to 3%.

In terms of monetary policy, Zhu Haibin maintains the prediction of a 30 basis point interest rate cut and a 100 basis point reserve requirement ratio cut by the People's Bank of China in 2025, believing that the central bank's monetary policy flexibility has increased.

Additionally, investment banks such as UBS, ANZ, and Crédit Agricole have also raised their expectations for China's economic growth.

Improved Stock Market Outlook, Cautious Optimism Spreads

Optimistic sentiment regarding growth prospects is improving the outlook for the Chinese stock market.

Nomura has upgraded Chinese stocks to "tactical overweight" and shifted some funds from India to China. Citibank has raised its target for the Hang Seng Index at the end of this year by 2% to 25,000 points and expects it to reach 26,000 points by the first half of 2026.

Citibank's China equity strategist Pierre Lau stated that he has upgraded the consumer sector from neutral to overweight, emphasizing the positive outlook for China's internet and technology sectors.

Maybank's Chief Investment Officer Eddy Loh sees opportunities in communication services and some discretionary consumer sectors. He stated:

"We believe Chinese stocks offer attractive risk-reward, and market valuations remain low."

Meanwhile, some experts caution against being overly optimistic about what may only be a tactical rebound in the stock market. Eurasia Group's China director Dan Wang stated:

"This does not change the big picture. The Chinese stock market still depends on domestic fundamentals."