Barclays: China May Need More Stimulus to Reach 5% Growth Goal
China’s government may need to introduce additional stimulus measures to achieve its 5% economic growth target for 2025, according to a recent analysis from Barclays.
A temporary easing in trade tensions with the United States has provided some relief from tariff-related pressures, but underlying economic challenges remain.
Last week’s data showed that China’s economy expanded by 5.2% in Q2, slightly slower than the 5.4% growth in Q1, but still beating analysts’ expectations. The resilience of exports, a major driver of China’s GDP, helped support the quarter’s performance despite elevated tariffs.
However, broader economic concerns persist. Ongoing tariffs, weak domestic consumption, and a slumping property sector continue to weigh on investor sentiment and growth prospects.
To address these challenges, Beijing has already deployed policy support, but with uncertainty still looming, many analysts believe more action may follow. Attention is now turning to the upcoming late-July Politburo meeting, which could set the tone for China’s economic policy for the rest of the year.
In a client note, Barclays analysts wrote that further stimulus would help “put a floor” under China’s slowing momentum, especially as the property sector deteriorates and export gains begin to fade. While they expect consumer spending to remain steady, they foresee overall growth momentum weakening.
Still, because the first half of the year came in stronger than expected, Barclays doesn’t anticipate any new measures being announced at the July Politburo meeting. Instead, they predict fresh fiscal stimulus could be introduced around September or October, possibly after a high-level gathering of the National People’s Congress Standing Committee.
💼 Barclays: Be Selective with China Exposure
Amid these macro uncertainties, Barclays advised investors to maintain selective exposure to China-related assets. They noted that their basket of European stocks with significant ties to China has underperformed the broader Stoxx 600 this year—meaning these names could benefit significantly if sentiment improves.
Highlighted stocks include:
- Luxury: Kering (EPA:PRTP)
- Watches: Swatch
- Automotive: Volkswagen, Porsche, BMW
- Beverages: Carlsberg (CSE:CARLb)
- Semiconductors: ASML, STMicro, Infineon (OTC:IFNNY)
Barclays suggested these names could be poised for a rebound in the event of more supportive policies or positive economic developments from Beijing.
