Despite tariff pressure, China's exports are expected to remain resilient.
by HE Liuying
HSBC held its 12th China Conference in Shenzhen on September 1-2, where Frederic Neumann, chief Asia economist at HSBC Global Investment Research, spoke with Jiemian News.
In its 2025 Global Investment Outlook, HSBC projects that India and ASEAN economies will maintain robust growth, while China steps up policy support. The bank forecasts that Asia's economy excluding Japan will grow by 4.4 per cent in 2025, compared with a global average of 2.6 per cent.
Neumann said the forecast remains unchanged as first-half performance across major Asian economies was stronger than expected. While some negative factors have emerged, he noted these are more likely to weigh on growth later in the year. For now, HSBC is maintaining its outlook.
He also shared his views on tariffs, the US dollar, and the renminbi.
Uncertainty over tariffs has continued to shape market sentiment this year.
Neumann argued that while Chinese exports are expected to remain resilient, the main risk for the global economy is that higher tariffs in the United States will push up prices and erode demand.
"Our conversations with manufacturers and logistics companies suggest that most exporters to the United States will pass higher tariff costs on to U.S. consumers. That’s why we remain concerned about U.S. inflation. We therefore expect American consumers to reduce purchases, and our forecast is for the U.S. economy to slow," Neumann said.
He added that uncertainty over tariffs and regulation may also dampen manufacturing investment, posing pressure on many economies.
With U.S. consumption weakening and global investment increasingly uncertain, Neumann warned that the world economy could face insufficient demand in 2026. For economies outside the U.S., the key challenge is how to generate effective demand.
"And primarily the focus is on fiscal policy. For example, in Europe, we have signals that Germany wants to expand fiscal policy. We have signals from many Asian economies that they want to expand fiscal policy. The world is also looking at China to help revive growth, to help overcome the slowdown from the United States," he noted.
"Fiscal policy is expansionary in China," Neumann said. He noted that Beijing still has fiscal space to act, particularly as global demand remains weak and inflation in China is low. "I think that fiscal policy has room for expansion," he added.
He stressed that as the world's second-largest economy, China has an important role to play in global growth.
"For example, China can help reduce trade barriers outside the United States and build deeper trade relations with other economies—for example with Europe, emerging markets, Latin America, Southeast Asia and the Middle East—to drive new markets. But it is not just about helping the rest of the world reduce trade barriers. China can also offer a lot of investments in other economies to help them transform into more vibrant, dynamic economies and generate the demand over time that's needed to offset the lack of demand from the United States," Neumann said.
Neumann noted that Washington's tariff hikes also have financial implications.
"In many ways, the imposition of tariffs in the U.S. makes the U.S. economy less competitive, makes U.S. companies less competitive, and ultimately reduces the return on capital in the United States," he said.
Against this backdrop, global capital is being reallocated. "Equity markets in other parts of the world are performing better. European equities have done quite well this year. Another example is the Chinese equity market, which after years of few inflows is now seeing a revival, partly because of the shift in global capital allocation," Neumann said.
He believes falling U.S. returns will reduce capital inflows and weaken the dollar.
On September 2, the U.S. dollar index, which measures the greenback against six major peers, hovered near 98. It has declined 9.28 per cent so far this year. The offshore yuan traded at 7.14 per dollar, a 2.65 per cent rise since January.
"So we've already seen the renminbi strengthen against the U.S. dollar. I think this can run further. I think fundamentally there is a prospect that the renminbi could strengthen much more over the next two or three years. And that is because the Chinese economy is so competitive that even a rise in the renminbi should not really impact the manufacturing sector all that much," Neumann told Jiemian News.
"It would be good for China and for the global economy if the renminbi rises in value, not dramatically, but gradually. That is because it will allow the rest of the world to sell more to China," Neumann said.
He added that such an appreciation would also boost Chinese households' purchasing power and support consumption. Neumann expected the yuan to strengthen gradually over the medium term, while cautioning that too rapid a rise could risk bubbles and instability. "But I am quite positive about the medium-term trajectory of the renminbi," he said.
