China's Economy is Expected to Grow 4.8% in 2026 Amid Surging Exports

China's economy is projected by Goldman Sachs Research to grow faster than consensus estimates this year as exports increase and the economic drag from a declining property market lessens.

Real inflation-adjusted GDP is forecast to grow by 4.8% in 2026. That's down from an estimated 5% last year but is still somewhat above economists' consensus of 4.5% for 2026.

The Chinese economy has changed significantly in recent years amid trade wars and a prolonged property downturn, writes Hui Shan, Goldman Sachs Research's chief China economist, in the team's report dated January 5. Both China's share of US imports and its new property starts (a measure of new residential construction projects) fell last year to levels last seen in the early 2000s.

In light of these shifts, policymakers face the challenge of finding new sources of growth in the coming years, Shan writes.

"Although Chinese exporters have successfully diversified into non-US markets, supporting our positive outlook for Chinese exports, building a consumption- and services-driven economy will take years, if not decades," she adds.

What's the outlook for China's economy?

Goldman Sachs Research's above-consensus forecast for Chinese economic growth is consistent with its above-consensus projections for monetary and fiscal policy easing, inflation, and exports.

Our economists anticipate slightly more policy easing in 2026 than the market expects as well as a widening in government borrowing as measured by the augmented fiscal deficit.

Similarly, Goldman Sachs Research's forecast for producer price inflation of -0.7% is modestly higher than the consensus expectation of -1.0%. China has been experiencing deflation in its producer price index (PPI) for more than three years, prompting the government to roll out a series of "anti-involution" policies designed to curb price competition among manufacturers.

The team expects year-over-year PPI to turn positive in early 2027. Meanwhile, they estimate headline consumer price inflation will largely remain below 1% this year despite a temporary boost from the sharp rise in gold prices and a consumer trade-in program offering government subsidies for replacing old goods.

Shan writes that the team's most distinctive out-of-consensus view concerns China's current account surplus—mainly reflecting the difference between money taken in through exports and money spent on imports. Goldman Sachs Research expects the surplus to rise to 4.2% of GDP in 2026 from 3.6% in 2025, while the consensus of economists surveyed by Bloomberg is for a decline to 2.5% of GDP.

China's exports were resilient in 2025 despite higher US tariffs, with real inflation-adjusted growth in exports on track to reach around 8% for the full year. That's partly due to a robust increase in exports to emerging market economies. Meanwhile, falling export prices are making Chinese products increasingly competitive.

The expected resilience of Chinese exports this year is linked to three factors, according to Shan: the rapid expansion of exports to emerging market economies, limited ability for other countries to impose significant trade barriers against China in the face of its dominance in critical minerals, and the potential for greater growth in high-tech exports.

Goldman Sachs Research expects price inflation for Chinese exports in US dollar terms to turn positive in 2026, rising to 0.7% from -2.7% last year. This reflects deflation in producer prices moderating gradually and the Chinese yuan appreciating slightly against the US dollar.

Can policymakers increase Chinese consumption and employment?

The Chinese labor market has been weak over the past few years. A weighted average of employment sub-indexes of various purchasing managers' indexes indicates that hiring has been at its most depressed level over the past decade (outside of Covid lockdowns), and Goldman Sachs Research's wage tracker suggests that year-over-year growth of urban nominal wages slowed to only 3.8% in the third quarter of 2025.

The team anticipates targeted government policies to help alleviate labor market pressures and support income growth in 2026. Potential measures include subsidizing services and offline businesses that are more labor-intensive, raising the minimum wage, reducing social security contributions for low-wage workers and flexible workers, and expanding unemployment insurance coverage and benefits.

But China's labor market weakness will still be difficult to tackle due to structural headwinds (high-tech manufacturing is not labor-intensive, and new technologies can displace workers) and cyclical challenges (like the property downturn), Shan writes.

A weak labor market has also constrained the ability of households to spend, while a continued decline in house prices has negatively impacted consumer confidence.

Although Goldman Sachs Research expects the year-over-year growth of household real consumption to moderate in 2026, the team forecasts government consumption will accelerate. The opposing forces are expected to result in a flat contribution to headline GDP growth from consumption.

Has China's property market stabilized?

China's property sector is in its fifth year of decline. Most property activity indicators—such as new home starts, sales, and property investment—are down 50%-80% from their 2020-2021 peaks.

There is no sign of the property market reaching a bottom yet. Housing inventory remains elevated, and some large developers still face challenging funding conditions. With the effects of fewer new residential housing projects still feeding through to property construction and investment, Shan writes, there appears to be no "quick fix" for the property sector.

If China follows the typical timeline of housing busts around the world, there might be another 10% drop in home prices ahead, and real prices may not bottom out nationwide until 2027, the team cautions.

Goldman Sachs Research expects the property sector to remain a drag on the Chinese economy in the coming years, but it projects that the size of that drag on annual real GDP growth—around 2 percentage points in both 2024 and 2025—will narrow by 0.5 percentage points per year over the next few years.

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