Market Highlight 06.03.2025

China has announced a GDP growth target of approximately 5% for 2025 during its annual parliamentary session on Wednesday, marking the first time in over a decade that the target has remained unchanged for 3 consecutive years. The commitment to sustaining high growth comes less than a day after U.S President Donald Trump raised new tariffs on Chinese goods to 20%, with additional tariff measures under review. As the trade war threatens to undermine China’s key growth driver - exports, larger fiscal stimulus measures will be necessary to offset the economic gap caused by declining trade with the U.S. If tariffs rise to 60%, as Trump previously stated during his election campaign, it could shave off 2% from China’s GDP growth this year. Stabilizing the real estate market will be crucial in boosting domestic consumer demand - China’s top policy priority for 2025 - as declining property prices since 2021 have triggered a negative effect, leading to weaker consumer spending. Another potential strategy is currency depreciation. During the first U.S - China trade war in 2018 and 2019, the Chinese yuan depreciated by 11,5% against the USD, offsetting approximately two-thirds of the tariff increases.

The USD has weakened significantly against most major currencies (-3%) this week, pressured by deteriorating U.S economic prospects and the potential inflationary impact of escalating trade tensions. The USD/VND exchange rate declined by approximately 50 VND yesterday, closing at 25.510. Sustained foreign currency demand helped limit the domestic exchange rate’s downward adjustment, making it less pronounced compared to the broader depreciation of the USD in global markets. The USD/VND exchange rate is expected to continue its downward trend today, approaching the strong resistance level of 25.450 from 2024.

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