China’s Economy to Grow 4.8% in 2026 as Exports Surge
Goldman Sachs Research has projected that China’s economy will experience a growth rate of 4.8% by 2026, propelled by a surge in exports. This upward shift follows a challenging period marked by weak inflation in the export prices represented in US dollars, which is anticipated to increase to 0.7% from a decline of 2.7% in the previous year.
China’s Labor Market Challenges
The Chinese labor market has shown signs of significant weakness in recent years. A study of various purchasing managers’ indexes uncovered that hiring levels have hit a decade-low, even excluding the disruptions caused by COVID-19. Furthermore, Goldman Sachs’ wage tracker indicates urban nominal wages saw only a 3.8% year-over-year growth in the third quarter of 2025.
Government Intervention Expected
To counteract mounting labor market pressures, targeted government policies are being considered for implementation in 2026. These potential measures include:
- Subsidizing labor-intensive services and offline businesses
- Raising the minimum wage
- Reducing social security contributions for low-wage and flexible workers
- Expanding unemployment insurance coverage and benefits
However, addressing the labor market’s weaknesses will prove challenging. Factors such as high-tech manufacturing, which is not labor-intensive, and new technologies that displace workers contribute to these ongoing issues. Additionally, the cyclical pressures from the property market downturn further complicate the situation.
Consumer Confidence and Consumption Trends
The frail labor market is also hindering household spending capability. Concurrently, declining property prices have adversely affected consumer confidence. Goldman Sachs predicts that while the growth of household real consumption may slow in 2026, government consumption is expected to rise, resulting in a flat contribution to the overall GDP growth from this sector.
Current State of China’s Property Market
China’s property market is currently grappling with its fifth consecutive year of decline. Significant indicators of property activity, such as new home starts, sales, and investment, have plummeted by 50%-80% compared to their peaks in 2020-2021. There is no clear indication that the market has found its bottom, as high housing inventory and funding challenges for large developers persist.
The effects of diminished new residential housing projects continue to disrupt property construction and investment trends. As noted by Goldman Sachs, there appears to be no immediate solution to stabilize the property sector.
