China: Projections for 2025

You're listening to All the Credit, a monthly podcast series brought to you by PGIM Fixed Income, an active global fixed income investment manager. Hey, everyone. This is Tom Porcelli, chief US economist at PGIM Fixed Income. Thank Thank you for joining another episode of All the Credit. I'm happy to have Shikib Farooqi with me. Shikib is our lead EM Asia economist. He joined us relatively recently. It's been an absolute fantastic addition to the team. So, Shikib, thanks for spending a little bit of time with us here today. Hey, Tom. Thanks for having me, and happy new year. There's a fair bit going on in China and lots to talk about, so I'm really looking forward to our conversation today. Yeah. And, Shakeib, the thing that I always worry about when there's a lot to talk about is that in so many ways, we're gonna be scratching the surface, which I think our regular listeners appreciate. But what I like to say is this then is just an opportunity for people to ping us if they have any questions or follow ups. And Shakeeb is more than happy to have any additional conversations. But you're right. There's a lot to get into here. I think our regular listeners know that we take a probabilistic approach to forecasting. So we create plausible scenarios for the coming twelve months, and then we assign a probability to each of those scenarios. In The US, we expect continued economic expansion over the forecast horizon with fat fat tails, which is something we've been flagging basically for the better part of the last year. And so, Shigheb, I think a good starting point is to walk through some of your scenarios as it relates to China in the coming year. So we'll keep it high level, and then we'll sort of drill in as necessary. I will say, yes, we will definitely get into tariffs and China reaction function. I think it's probably worth starting at the beginning. So, Shakeeb, give us what you're thinking over the next twelve months. Yeah. Sure. Sounds good, Tom. So let me start with a broad based rundown of how we see 2025 shaping up for China. Obviously, tariffs and the response to the tariffs is gonna be a big theme within that. But before we get into that, I think maybe let's just sort of lay the ground on where China is. So I think it's clear that China needs to address its demand and financial and fiscal imbalances this year, which are structural in nature. And they go to the core of China's local government and SOE led growth model. They need to raise private sector confidence, and they need to allow the property sector to heal. Without this, China, I think, will only entrench itself in a deflationary balance sheet recession liquidity trap. Now in terms of what you were saying, so when we think about sort of the five scenarios that can …