The International Monetary Fund (IMF) has revised upward its forecast for China’s economic growth in 2025, now projecting a 4.8% expansion, 0.8 percentage points higher than its April estimate — despite the global trade war the United States is waging.

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In its latest Asia-Pacific Economic Outlook, released Friday in Hong Kong, the IMF also predicts that China’s economy will grow 4.2% in 2026, two points higher than previously forecast.

The Fund credited the stronger forecast to the effects of government stimulus measures and the unexpected strength of Chinese exports, which have held up despite Washington’s trade restrictions. The report noted that Beijing’s efforts to diversify export markets have softened the blow from U.S. tariffs.

“Trade frictions with the United States have encouraged deeper trade integration within Asia,” the IMF observed, adding that China’s exports to the U.S. now account for a smaller share of its total shipments, while trade with regional partners has surged. One example, it said, is the increasing re-routing of intermediate goods from China to the Association of Southeast Asian Nations (ASEAN) for additional processing.

However, in a downside scenario, the IMF estimated that further tariff increases by Washington could trim as much as 1.3 percentage points off China’s short-term GDP growth.

To sustain momentum, the Fund urged Beijing to intensify support for consumption, improve capital allocation efficiency, and push ahead with structural reforms to address deep-seated imbalances in the real estate market.

“While China has managed to refinance some developer and local government debt, more decisive action is needed to restructure unviable entities,” the report noted.

Despite these challenges, the IMF concluded that Asia — powered primarily by China and India — will remain the world’s main growth engine, expected to generate roughly 60% of global economic expansion through 2025 and 2026.

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