BofA has upgraded its forecasts for Chinese growth. Here’s why.

Investing.com - Resilient exports offered some support for China’s economy in the July-September period, helping offset some headwinds from a "clear softening" in domestic demand since June, according to analysts at BofA Securities.

In a note, the analysts including Helen Qiao and Xiaoqing Pi said recent numbers aligns with their view that growth in the world’s second-largest economy will "muddle through without immediate help from policy stimulus" from Beijing.

China’s economy grew slightly more than expected in the third quarter of 2025, but at its slowest pace in a year amid persistent headwinds from rampant disinflation and U.S. trade tensions.

Gross domestic product grew 4.8% year-on-year in the three months to September 30, government data showed on Monday. The print was slightly above expectations of 4.7% but slowed from the 5.2% rise seen in the prior quarter.

On an annualized basis, GDP growth was also at its slowest since the third quarter a year ago. GDP grew 1.1% quarter-on-quarter, above expectations of 0.8%.

The reading brought China’s year-to-date GDP to 5.2%, down slightly from the 5.3% seen in the prior quarter but still above Beijing’s 5% annual target.

Exports and manufacturing remained the biggest drivers of growth, while consumer spending and private investment cooled further. Beijing had doled out a slew of stimulus measures to support growth in recent quarters, although support from these measures was seen cooling in recent months.

The data appeared to highlight that some facets of the Chinese economy, especially its massive export industry, remained strong and continued to underpin growth. But persistent deflation, weak private investment and a prolonged property market downturn all detracted from growth.

Other figures showed the Chinese economy picking up some pace in September. Industrial production and retail sales grew more than expected last month, while China’s unemployment rate also unexpectedly fell to 5.2% from 5.3%.

But fixed asset investment -- a gauge of business spending -- unexpectedly shrank 0.5%, logging its first monthly contraction since the COVID-19 pandemic in 2020.

However, given "a more positive tone" around trade after an agreement reached between U.S. President Donald Trump and Chinese counterpart Xi Jinping last month, "risks are skewed to the upside," the BofA analysts said.

They subsequently upgraded their China GDP growth forecasts to 5% for this year, 4.7% for 2026, and 4.5% for 2027. It had previously called for expansion of 4.7%, 4.3%, and 4.1%, previously.