Headwinds for the Chinese economy intensify ahead of "Trump 2.0"
― Accelerating de-risking from China could be a tailwind for the rest of Asia ―

There has been a disparity in economic performance between China and other Asian countries/territories. In 2025, the economic gap between China and other Asian economies is expected to widen further due to the trade policy of the incoming Trump administration in the US. We expect the increase in US tariffs on imports from China to 60% to depress China's economic growth rate to the mid 4% range. On the other hand, the economies of Vietnam, Taiwan, Thailand and Malaysia will likely benefit from the effect of relocating production away from China.

However, attention also needs to be paid to the risk that damage caused by the policies of the incoming Trump administration extends beyond China's economy to encompass Asia as a whole. This could occur via three routes: 1) destabilization of foreign exchange markets, 2) economic sanctions, and 3) increased dependence on China.

The Chinese economy still faces serious structural problems, and the risk of a sharp correction cannot be ruled out. A severe adjustment in the property market and sluggish consumption could worsen the economy further, with economic policy remaining on a small scale.

The US government's tough stance towards China is expected to promote the relocation of production and the substitution of exports, and exports are expected to grow as a result. However, manufacturing growth has been slower than expected and calls within the administration to actively embrace Chinese capital may increase.

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