(Yicai) July 30 -- The International Monetary Fund has raised its economic growth forecast for China this year to 4.8 percent from an earlier projection of 4 percent, marking the biggest upward revision for any major economy in its latest World Economic Outlook report.

The substantial upgrade reflects China's stronger-than-expected economic activity in the first half, in particular robust exports, the IMF said in the report published yesterday. The Washington-based lender also said the country's gross domestic product will likely expand 4.2 percent next year, up from its previous 4 percent prediction.

Earlier this year, China’s government set an annual economic growth target of around 5 percent. The economy expanded 5.3 percent in the first half, the National Bureau of Statistics revealed two weeks ago, as the government implemented more policies to address external trade and economic uncertainties and internal challenges stemming from industrial restructuring.

Growth beat expectations “mainly driven by exports, propped up by a depreciating Chinese yuan closely tracking the dollar and with declining sales to the United States more than offset by strong sales to the rest of the world,” the IMF noted.

“This is coming in part from a very strong first quarter that we see for China's economic activity, with a particularly important component, which was the strength of exports from China to other parts of the world, the European Union area, Asia, and other countries,” said IMF Chief Economist Pierre-Olivier Gourinchas.

"However, domestic demand in China remains relatively weak,” Gourinchas noted. “That's something that we've been flagging for a while and is a source of concern for the continued growth performance.”

The global economy maintains "tenuous resilience amid persistent uncertainty," with its growth projection updated to 3 percent for 2025 and 3.1 percent for 2026, up from 2.8 percent and 3 percent, respectively. "This reflects front-loading ahead of tariffs, lower effective tariff rates, better financial conditions, and fiscal expansion in some major jurisdictions," the IMF said.

"One of the components of this upward revision for China is indeed the fact that the level of tariffs that China was expected to face back in April has been reduced after the announcement of an agreement in May between the US and China," Gourinchas pointed out. 

However, trade policy uncertainty remains elevated. The US pause on higher tariffs for most trading partners is set to expire on Aug. 1, but earlier this month the Trump administration threatened to impose even higher duties than those announced on April 2.

For emerging market and developing economies, the IMF raised its forecast to 4.1 percent from 3.7 percent for 2025 and to 4 percent from 3.9 percent for 2026. But risks to the global outlook remain tilted to the downside, with potential tariff rebounds and elevated uncertainty threatening to weigh on economic activity.

Global inflation is expected to decline to 4.2 percent this year and 3.6 percent next year, though cross-country variations persist, the IMF noted.

Editor: Martin Kadiev