Top Ten Securities Firms Outlook for 2025 Chinese Economy: Revitalizing Domestic Demand Grand Narrative, Consumption May Be the Only "Certainty," Real Estate Enters "Bottoming" Stage

In 2025, facing a complex and changing international environment and profound adjustments in the domestic economic structure, how the Chinese economy will navigate forward has become a global focus. Against this backdrop, Wall Street Insights has compiled the outlook reports on the Chinese economy for 2025 from the top ten domestic securities firms, analyzing the economic development trends for the coming year from different perspectives.

CITIC Securities pointed out that, overall, "lightly equipped to re-engage" may be the core idea of this round of economic policy, which is expected to drive the economy to show a "U"-shaped growth next year.

In terms of structural policies, most of the top ten securities firms believe that one of the key themes of next year's policy is to boost domestic demand and stabilize prices. Tianfeng Securities believes that consumption, supported by policies, will offset the impact of tariffs, and the downward pressure on prices will gradually ease next year; CICC noted that the economy is expected to move towards "semi-inflation" next year, with reducing debt burdens and direct fiscal support for people's livelihoods being the two main tools to boost domestic demand; the Guotai Junan macro team believes that protective fiscal policies will begin to take effect after the Two Sessions, pushing the consumption center to rise seasonally...

The institutions unanimously believe that Trump's "high tariff" policy will be a significant uncertainty for the Chinese economy next year. Huatai Securities predicts that if the "sickle" falls, China's stable growth policies may be intensified after the Political Bureau meeting in April next year as a response. Guotai Junan Securities and Haitong Securities believe that under the support of "grabbing exports" and transshipment trade, exports may still provide some support for the economy throughout the year.

In addition, the real estate sector is expected to enter the final "bottoming" phase next year. Huachuang Securities believes that policies will strive to stabilize the real estate market, but the dimension of "volume" does not rely on its growth, i.e., "controlling volume to maintain price." Haitong Securities pointed out that the real estate sector still faces certain pressures, but with active policy support, sales and investment may gradually bottom out and recover.

CICC: Reducing debt burdens + direct fiscal support for people's livelihoods, moving towards "semi-inflation" next year

CICC pointed out that the main contradiction facing the current economy is a significant demand gap and price pressure. The key to solving the problem is to reduce the debt burden of economic entities and provide direct fiscal support for people's livelihoods.

In the outlook report released in mid-November, the team led by Zhang Wenlang at CICC noted that recent policies have demonstrated a determination to stabilize growth, with monetary policy reducing interest burdens and fiscal policy needing to be strengthened. Direct fiscal support for people's livelihoods can bypass intermediaries to directly stimulate demand, which is especially important under export uncertainties. There is considerable room for improvement in the livelihood sector in China, and policies targeting high-consumption groups are more likely to boost growth.

According to CICC's estimates, if the demand gap is to be bridged over more than two years, the actual economic growth rate next year may need to increase by about 0.5 to 1 percentage point compared to this year. If the external environment deteriorates, the difficulty of stabilizing growth will also increase accordingly. Tariffs may affect China's economic growth through channels such as exports and industrial layout, and the scale of net fiscal expenditure needed to offset this impact may be around 1.1% of GDP in 2024 A relatively ideal scenario is that counter-cyclical policies continue to be intensified, raising the actual economic growth rate from about 5% this year to around 5.5% by 2025. This means that, in addition to the funds released from debt swaps, net fiscal spending needs to increase by nearly 2% of GDP.

CICC predicts that if the budget deficit rate increases by 1 percentage point compared to this year, the remaining portion may come from special government bonds, special bonds, etc. In this case, the GDP deflator inflation may rise from about -0.4% in 2024 to 0.5-1% in 2025, while CPI inflation may increase from around 0.3% to a level of 1-1.5%, approaching what Keynes referred to as a "semi-inflation" scenario.

CITIC Construction Investment: Revitalize China's domestic demand, ushering in a major interest rate cycle in 2025

The team led by Zhou Junzhi at CITIC Construction Investment believes that the current Chinese economy needs to undergo a necessary path of revitalizing domestic demand, but the probability of another round of strong stimulus like the 4 trillion yuan package in 2008 is low, as the current fundamentals differ significantly from that time. Revitalizing domestic demand will go through three inevitable stages: (1) liquidity easing, leading to a major interest rate cycle in the market, (2) recovery from the oversold real estate sector, ending the deflationary negative cycle, (3) guiding capacity clearance and asset price recovery.

Truly revitalizing domestic demand is not an overnight process. The Zhou Junzhi team believes that by 2025, the Chinese economy will likely have passed the first stage, and if fortunate, may enter the second stage in the latter part of 2025. If the external dollar remains strong in 2025, and the central bank considers internal and external balance (lowering interest rates domestically while maintaining the exchange rate externally), the pace of interest rate decline may not be fast. If this is the case, the market may need more patience to emerge from the second stage of weak demand.

Zhou Junzhi stated that in 2025, for Chinese stocks and bonds, the current liquidity market has not yet ended, and the A-share market will likely still focus on liquidity first. Whether Chinese stocks and bonds can enter a new trading cycle in 2025 fundamentally depends on whether interest rates are lowered to an appropriate level. Under the trend of global supply chain reshaping in 2025, the overseas sectors and export chain sectors with absolute competitive advantages that drive the increase in non-US market share may provide incremental structural opportunities for the Chinese stock market.

CITIC Securities: Policies "lightly re-engage," with the economy possibly showing "U"-shaped growth in 2025

The Yang Fan team at CITIC Securities believes that "lightly re-engaging" may be the core idea of this round of economic policy, promoting the stabilization and recovery of the Chinese economy and structural optimization through a "three-step" approach of risk resolution, fiscal expansion, and deepening reforms, significantly improving social expectations.

First, through a series of policy combinations, local fiscal pressure and risks in the real estate sector are expected to be effectively alleviated. Secondly, it is anticipated that macro policies will continue to exert force in 2025, further solidifying the fundamentals and driving the economy upward and the structure toward improvement The Yang Fan team believes that the government's deficit rate will significantly rise to 4% in 2025, utilizing various fiscal and monetary policy tools to increase support for the real economy. In terms of investment, there will be enhanced support for stabilizing livelihoods and promoting consumption, improving residents' income expectations, stimulating consumption potential, driving effective investment, and expanding domestic demand.

Looking ahead to 2025, the Yang Fan team points out that the potential risk of tax increases on exports may become a major drag on growth, but strong macro counter-cyclical policies will lead to improvements in consumption and fixed asset investment. At the same time, the production side is expected to contribute significantly to GDP. It is expected that the overall economic growth in 2025 will show a "U" shape, achieving around 5% growth.

Finally, 2025 marks the concluding year of the "14th Five-Year Plan" and the preparatory year for the "15th Five-Year Plan," with a new round of reform chapters about to begin. The Yang Fan team suggests focusing on structural opportunities in areas such as technological innovation, green development, and state-owned enterprise reform.

TF SECURITIES: Downward pressure on prices may gradually narrow, consumption may offset the impact of tariffs under policy support

Although the economic growth target and deficit rate are highly 关注 topics in the market, TF believes that reform is the policy focus for 2025. Since the end of July, the introduction of various policies has revolved around this underlying logic of reform. With the continuous implementation of policies, the downward pressure on prices (CPI and PPI) may gradually narrow next year, and signals of fundamental improvement will gradually emerge. The negative drag of real estate on the economy may gradually weaken.

TF SECURITIES expects that by the end of next year, the prices of second-hand houses and new house sales will basically bottom out, and CPI and PPI may gradually return to normal levels, with CPI growth expected to exceed 0.5%, approaching around 1%, and PPI expected to return to positive growth. The GDP deflator index may turn positive in the second half of next year, especially in the fourth quarter.

Among them, exports may be a volatile item, but through re-exports, going abroad, and improving manufacturing capabilities, the impact of tariffs on Chinese exports may be smaller than the market expects, especially compared to the expectations of foreign-funded banks.

TF SECURITIES points out that the key to coping with export fluctuations lies in domestic demand, especially consumption. Against the backdrop of policies emphasizing the need to vigorously boost consumption and comprehensively expand domestic demand, TF expects that consumption may perform better next year than this year. Especially in the second and third quarters of next year, in order to offset the impact of exports, policies may further intensify, pushing retail sales to continue to stay at the upper end of the range, with growth in certain months potentially exceeding 5% under low base conditions.

Kaiyuan Securities: The extent of RRR cuts and interest rate reductions may exceed 2024

The He Ning team at Kaiyuan Securities believes that in 2025, there is a high probability of loose fiscal and monetary policies, with the intensity of policies possibly increasing, and there is room for both monetary and fiscal efforts. The operational space for conventional monetary policy is relatively large, and it is expected that the RRR cut in 2025 may be at least 100 bps, with interest rate cuts possibly exceeding those in 2024, and deposit rates will also decline.

KaiYuan Securities is optimistic about consumption in the long term, and policies will expand domestic demand by boosting consumption.

First, stabilization of the real estate market is a prerequisite for the recovery of consumption. Factors such as the recovery of residents' debt repayment rates, monetized resettlement, and storage may stabilize and rebound real estate sales; second, the wealth effect from stocks can promote consumption; third, emphasis on people's livelihoods, subsidies for low-income individuals and students benefit consumption, while improving social security helps increase the proportion of residents' income in GDP, boosting consumption; fourth, consumption stimulus policies: the effect of replacing old consumer goods with new ones is significant; fifth, the second urbanization mainly drives consumption, bringing about multi-faceted demand growth through promoting the "urbanization of the floating population."

KaiYuan Securities expects the actual GDP growth rate in 2025 to be 5.0%, with a nominal growth rate of 5.3%; policies to expand domestic demand will drive a moderate rise in prices, with the CPI expected to show a high-to-low trend year-on-year in 2025, averaging around 0.4% year-on-year for the whole year.

Huatai Securities: Moderate recovery in domestic demand, increased external volatility

Analysts including Yi Shan from Huatai Securities believe that the overall orientation of macro policies in 2025 is expected to be significantly more accommodative than in the second and third quarters of this year; under a continuously accommodative policy environment, the real estate downturn cycle may enter a "bottoming" phase next year. As a result, domestic demand growth may see some recovery.

If the Trump administration significantly increases tariffs on China, Huatai Securities predicts that China's efforts to stabilize growth may be intensified after the Political Bureau meeting in April next year. Compared to a "low tariff" scenario, the central bank may further cut interest rates by 20 basis points, and the fiscal counter-cyclical efforts are expected to increase— the actual (central + local) broad fiscal deficit in 2025 may further expand by about 1.5 trillion yuan, mainly executed in the second half of the year.

In a "high tariff" scenario, Huatai Securities expects the actual GDP growth in 2025 to be around 4.5%, while in a "low tariff" scenario, it will be around 5%.

The Yi Shan team points out that under high tariff scenarios, the speed of external demand decline may further accelerate, negatively impacting domestic residents' income expectations and consumption behavior. Domestic policies may increase counter-cyclical adjustments to offset the impact of high tariffs, including further monetary easing, expanding the fiscal budget deficit ratio, increasing the issuance of special bonds, and stabilizing the real estate market.

Huatai predicts that under low tariff/high tariff scenarios, the year-on-year growth rates for 2025 in total retail sales, fixed asset investment, and exports and imports in US dollars will be 5.0%/3.7%, 3.5%/4.4%, 3.4%/-0.6%, and 4.8%/1.8%, respectively.

Minsheng Securities: Relative "Certainty" Amid Numerous Uncertainties

Looking ahead to the macroeconomic and policy landscape in 2025, the Tao Chuan team at Minsheng Securities believes there are two major focal points: first, the strategies in the economic and trade fields after Trump takes office; second, China's path to breaking through external uncertainties. The key to the former lies in recognizing the "known unknowns" behind the "tariff increases"; the core of the latter is how China can effectively stimulate domestic demand to escape low inflation.

On the overseas front, Trump's moves have three major "variables": personnel appointments are quick, and policies may be rapidly advanced in the form of "combinations"; tariff increases may be implemented in phases and by issues starting in the first quarter of next year; the risk of the Federal Reserve pausing interest rate cuts is rising.

On the domestic policy front, playing the "first move" in policy is more important than the "second move" in monetary policy.

Fiscal "first move": In 2025, the implementation of "the central government still has considerable room for borrowing and increasing deficits" is expected, predicting that the scale of government debt may likely cross from 11 trillion yuan to 15 trillion yuan in 2025. Monetary "second move": The "recalibration" of exchange rate constraints will be key, with a reserve requirement ratio cut in the first quarter likely becoming a normalized hedging tool, and the 5-year LPR rate may be individually lowered by 20-25 basis points, with a potential space for a 30-40 basis point reduction in 7-day reverse repos in the second quarter and beyond.

Minsheng Securities believes that policies are preparing for potential tariff increases in the future, but the fundamental strategy of "taking the initiative" and expanding domestic demand is not constrained by external environments. It is expected that the GDP target for 2025 will continue to be set at around 5%, but due to potential tariff shocks and economic structural transformations, a deviation of 0.5 percentage points (not lower than 4.5%) is also acceptable, thus predicting an actual GDP growth rate of 4.6% for the year.

Structurally, consumption is the key. Minsheng Securities stated:

Compared to exports and investments, consumption may be the relative "certainty" among numerous uncertainties next year. The current "two new" policies are expected to be implemented and intensified around the two sessions next year and continue until the end of 2025 Minsheng Securities expects that next year, with the support of "two new" funds, it may expand to over 500 billion yuan, supporting a year-on-year growth rate of around 5.0% for social retail sales in 2025.

Huachuang Securities: Unraveling the Three Spirals

The Zhang Yu team at Huachuang Securities believes that the current main contradiction can be summarized as—“economic downturn, wealth shrinkage, and weak expectations,” which represents the intertwined issues of the economy, wealth, and expectations as indicated by prices, housing prices, and stock prices. The economic and asset allocation next year will largely depend on the resolution process of the “three spirals.”

Regarding housing prices, the Zhang Yu team believes they will strive to stabilize the real estate market, but the dimension of “volume” does not rely on its growth, i.e., “controlling volume to maintain price”; regarding stock prices, they will work to enhance their “stability,” but always guard against “financial churn”; regarding PPI, relying solely on the demand side is less likely, and a combination of “supply-side” reforms and expanding domestic demand is more probable, but the execution may lean towards “market-oriented”; regarding expanding domestic demand (consumption and investment): a loose fiscal policy is an inevitable path, but it will emphasize “fiscal discipline.”

So, how large must the scale be in the three areas of destocking, capacity reduction, and loose fiscal policy to hope to “unravel the three spirals”? The Zhang Yu team predicts that destocking, excluding land reserve, requires about 1.4-4.3 trillion yuan; capacity reduction needs to account for 1.4%-2.0% of overall industrial capacity; and loose fiscal policy may require the government’s broad deficit ratio to be between 9.6%-11.0%.

The Zhang Yu team hypothesizes that if the three spirals are successfully unraveled, the economy will move towards recovery, with stocks and bonds flying together to divergence, and the stock market transitioning from valuation repair to trading profit expectations contributing to trading profits, while the bond market experiences a bull tail with fluctuations entering a bear market.

Huachuang Securities expects that 2025 will face the same issues as 2024, namely “price is more important than volume.” The expected annual real GDP growth rate is about 4.9%, with a nominal GDP growth rate of around 4.6%, among which the real estate, financial, and wholesale retail industries may perform better than this year; the average annual CPI year-on-year is expected to be 0.8%, and the average annual PPI year-on-year is expected to be around -1%.

The issue of exports will be more complex. Huachuang Securities expects that, without tariff issues, the annual growth rate may slightly decline to around 3%; the growth rate of social retail sales is expected to rebound to between 4-5%, and it is anticipated that there may be subsidy measures for consumption next year, with the “two new policies” expected to continue.

Guotai Junan: Manufacturing and infrastructure investment will still take the lead, and protective fiscal policies may begin to take effect after the Two Sessions

Guotai Junan points out that the macro environment in 2025 has characteristics of both continuity and transition: 2025 is the concluding year of the 14th Five-Year Plan, which means there are still high requirements for economic growth; it is also the starting year of the 20th Central Committee's Third Plenary Session “Five-Year Plan,” and medium- to long-term reforms in fiscal and taxation will soon be launched To comprehensively address internal and external risk challenges, Guotai Junan believes that it is necessary to break through internal fiscal constraints and export production capacity externally:

Debt reduction is the first move in fiscal policy. Only after alleviating local hidden debt risks can space be created for the central government to leverage. The transformation from an investment-oriented fiscal policy to a 保障型 fiscal policy is an inevitable path. It is expected that the budget deficit rate in 2025 will need to increase from 3% in 2024 to 3.6%-4.0%, with the broad deficit rate rising by about 1.5%. Against the backdrop of high tariff barriers, exporting production capacity is expected to replace product exports as a new opportunity for Chinese enterprises to go abroad.

Guotai Junan Macro expects that the GDP growth target for 2025 will still be set at around 5%, but there may be some flexibility in its completion. Considering the impact of tariffs and the counterbalance of domestic demand policies, the actual GDP growth in 2025 is expected to be 4.8%:

1. It is expected that manufacturing and infrastructure investment, as the ballast for domestic demand, will continue to take the lead, and the decline in real estate investment is expected to narrow in the second half of the year;

1. It is expected that 保障型 fiscal policy will begin to take effect after the Two Sessions, with the consumption center gradually rising each quarter;

1. It is expected that Trump's tariff policy will be implemented in March, taking a gradual approach, with "export rush" in the first quarter, negative export growth in the second and third quarters, and reducing tariff impacts in the fourth quarter through re-export trade and exploring markets in non-American countries.

Haitong Securities: Macro policy will not be a "flood irrigation," improving residents' income and expectations is equally important for boosting consumption

Haitong Securities expects that the GDP growth target for China in 2025 is likely to be set at around 5%. China has great potential for medium- and long-term economic growth, but short-term demand needs to be boosted

Current consumption growth still needs to be boosted, and improving residents' income and expectations is equally important.

The real estate sector still faces certain pressures, but with active policy support, sales and investment may gradually bottom out and recover.

Supported by "grabbing exports" and transshipment trade, it is expected that exports will still provide some support to the economy for the whole year.

The growth rate of financing may be the key to economic recovery. Based on past experience, financing indicators are leading indicators of China's economy.

Haitong Securities pointed out that the policy for stabilizing growth will still continue within the framework of "high-quality" development and will not implement a strong stimulus in a flood-like manner.

Monetary policy will be more "supportive," but the possibility of rapid interest rate cuts is not high; fiscal policy will marginally increase its bottom-line support function, but fiscal discipline will still be maintained; real estate policy focuses on bottom-line support and maintaining the baseline; infrastructure investment will emphasize investment efficiency and will not engage in inefficient or ineffective investments.

Haitong Securities expects that "the curtain of the fiscal cycle in China has already opened," with the deficit rate possibly rising to over 3.5% next year, the scale of special bonds increasing to 4 trillion, and the issuance scale of special government bonds exceeding 1 trillion, with an additional issuance of 600 billion to 1 trillion special government bonds to replenish bank capital. Fiscal expenditure will focus on supporting land reserves, affordable housing, equipment upgrades, and the replacement of old consumer goods, with the expected scale of the broad deficit increasing by 1 trillion compared to 2024 to cope with economic downward pressure