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China growth outlook softens as PMI contracts return
Rabobank expects growth around 4.5% in 2026 and 4.2% by 2027, with domestic demand still weak.
Rabobank strategists said renewed China softness is showing up in official PMI releases, with both manufacturing and non-manufacturing activity slipping back into contraction territory. They added that domestic demand remains soft and that a Politburo meeting offered limited comfort for investors expecting fresh stimulus.
According to FXStreet summarizing the Rabobank view, policymakers are prioritizing faster implementation of measures already in place rather than announcing new stimulus. The team expects China’s growth trend to drift below the authorities’ 4.5% to 5.0% target range over coming years, even as the pace of contraction in PMIs points to continued weakness.
Rabobank also argued that China’s economy still relies heavily on exports to support growth, while domestic cracks remain wide. Weak consumer demand, falling foreign direct investment, subdued business investment, and persistent overcapacity in parts of the industrial sector are seen as continuing headwinds.
The strategists warned that shifting toward a more consumption-driven growth model could be costly and disruptive, particularly if trade tensions intensify. They also noted that Europe could be exposed as Chinese firms look abroad to absorb excess production, and that the EU has rolled out policies aimed at strengthening domestic production and limiting vulnerability to external pressure.