Foreign institutions raise China's GDP growth forecast; Renminbi assets are gradually becoming a "must-have" allocation option

Securities Times Reporter Li Yingchao

Against the backdrop of ongoing fluctuations in the global geopolitical landscape, recent Chinese economic data for the first quarter still exceeded market expectations, boosting global capital allocation toward Chinese assets. Several foreign institutions, including Deutsche Bank and Standard Chartered, have also updated their assessments of China’s economy.

According to industry insiders, foreign investors currently have a strong desire to seek alternative safe assets. “Looking at the overall prospects, RMB assets will increasingly become an indispensable part of global asset allocation in the future,” said Ding Shuang, Chief Economist for Greater China and North Asia at Standard Chartered Bank.

Revising Up China’s Economic Growth Forecast

Based on multiple positive factors such as China’s unexpectedly strong economic growth in the first quarter, robust export momentum, and stabilization of the real estate market, Deutsche Bank’s Chief Economist for Greater China, Xiong Yi, and his team stated in their latest research report that they have raised their forecast for China’s full-year real GDP growth in 2026 by 0.4 percentage points to 4.9%, with nominal GDP growth forecast increased to 6.5%, the highest level since 2022.

“China’s economy has already shown a positive trend of ‘rising in both quantity and price’ in the first quarter of this year, establishing a trend of inflation re-expansion. A healthy rebound in prices will improve corporate profitability and provide strong support for the recovery of investment and household income,” said Xiong Yi.

He believes that the core driving force behind this optimistic outlook stems from China’s outstanding export performance. According to customs statistics, in the first quarter of this year, China’s goods trade imports and exports totaled 11.84 trillion yuan, a year-on-year increase of 15%. Among them, exports reached 6.85 trillion yuan, up 11.9%; imports were 4.99 trillion yuan, up 19.6%. Deutsche Bank research indicates that this growth momentum is sustainable, listing five major drivers:

1. Generative artificial intelligence—driving global demand for computing power, data centers, and related equipment.

2. Heavy assets and low depreciation—under the influence of AI infrastructure and supply chain diversification, exports of heavy-capital goods such as machinery, equipment, and metals are expected to benefit from this global investment cycle.

3. Energy cost advantages—China’s relatively low dependence on oil and gas enhances its price competitiveness for exported goods amid high global energy prices.

4. Accelerated green transformation—rising traditional energy prices are boosting global demand for green transition, driving markets’ demand for new energy vehicles, batteries, and power components.

5. Diversification of export markets—China has significantly enhanced the resilience of its overall exports by strengthening diversification of export destinations, especially in emerging markets.

Given these multiple favorable factors, Deutsche Bank has sharply raised its forecast for China’s full-year export growth in 2026 from 6% to 12%, and expects China’s current account surplus to expand to $872 billion, accounting for 4.0% of GDP.

Shift Toward Long-term Consumption Policies

Alongside the export outperformance, positive changes are also evident in domestic demand. Data from the National Bureau of Statistics show that fixed asset investment increased by 1.7% year-on-year in the first quarter, a significant rebound from previous lows, with infrastructure investment up 8.9% and manufacturing investment up 4.1%.

“This improvement is attributable to proactive fiscal policies early in the year and the implementation of major projects under the 14th Five-Year Plan, which continue to drive domestic demand through investment,” said Ding Shuang.

Regarding boosting consumption, Ding Shuang believes that policies are gradually shifting from short-term stimulus to the construction of long-term mechanisms. In the short term, over-reliance on subsidies such as old-for-new schemes should be avoided; some retail sales of subsidized consumer goods experienced negative growth in the first quarter, indicating that short-term stimulus may lead to preemptive consumption and fail to create sustainable support.

Ding Shuang stated that this year, certain scales of old-for-new and national subsidies will still be maintained, mainly to prevent a sharp decline in related retail sales and ensure a smooth transition in consumption. In the medium to long term, increasing consumption capacity should focus on three main paths: first, implementing income increase plans for urban and rural residents by stabilizing employment and cultivating new employment formats; second, improving the social security system to enhance basic pension and medical benefits for low-income groups, promoting equitable access to public services, and reducing the propensity for precautionary savings; third, optimizing the supply of consumer services by exploring potential in sports events, tourism, cultural performances, and other sectors, and cultivating new consumption scenarios.

Xiong Yi also noted that Chinese residents still have considerable room to increase spending in entertainment, healthcare, and public services. Breakthroughs in these areas could significantly promote service consumption and boost overall domestic demand.

RMB Assets Gradually Becoming a “Must-Have” Allocation Option

Several foreign analysts believe that as China’s economic momentum strengthens, domestic demand structure optimizes, and institutional opening progresses steadily, RMB assets are shifting from an optional component to a necessary part of global allocation, with a clearer long-term trend.

Currently, with rising geopolitical risks, global investors are actively seeking safe assets to replace the US dollar. According to Securities Times reporters, many overseas investors have a strong desire to find alternative safe assets, but the consensus is—there are no other markets that can truly match the depth and liquidity of the US market in the short term.

Ding Shuang said that RMB internationalization is a gradual process. Besides safety, returns are equally important. From China’s perspective, as deflation pressures ease, inflation gradually returns, and with rapid development of emerging industries, equity asset yields are beginning to rise. If inflation continues to normalize, the overall market yield center is expected to lift.

“Under the combined influence of rising yields, increasing demand for safe assets, expanding market openness, and richer risk management tools, RMB is expected to become part of a diversified safe asset portfolio,” Ding Shuang believes. This process requires China to further open up, continue advancing RMB internationalization, and steadily improve asset yields. “Looking at the overall outlook, RMB assets will increasingly become an indispensable part of global asset allocation.”

Morgan Stanley China’s Chief Economist Xing Ziqiang recently stated at a specialized interbank market event that, under the macro pattern of “stability in the East and turbulence in the West,” global investors are gradually reducing reliance on single-dollar assets. Chinese assets are expected to continue attracting capital inflows during reallocation, which is an “inevitable result of global diversification.”

OCBC Bank also observed similar trends. OCBC Bank China CEO Hong Yongxiang believes that as Chinese enterprises deepen their global deployment, RMB internationalization will become an inevitable trend. OCBC Bank’s Head of Macroeconomic Research, Xie Dongming, added that RMB is still mainly based on bilateral mechanisms, with room for overall efficiency improvement. “Whether it can shift from bilateral to multilateral in the future is a question for further consideration. From recent changes over the past one or two years, the trend is already very clear.”

(End: Wang Zhiqiang HF013)

【Disclaimer】This article only reflects the author’s personal views and is not related to Hexun.com. Hexun.com maintains neutrality regarding the statements and opinions expressed herein and does not guarantee the accuracy, reliability, or completeness of the content. Readers should use it as a reference and bear all responsibilities themselves. Email: news_center@staff.hexun.com