China's Economic Slowdown: Trade Tensions and Deflation Create Mounting Pressure

China's economy faced a slowdown in the second quarter, primarily driven by ongoing trade tensions with the United States and strengthening deflationary pressures. This has led to heightened expectations that Beijing may soon implement further stimulus measures to cushion the slowdown.

The fragile U.S.-China trade truce and existing policy stimulus have helped Asia's largest economy stave off a sharp downturn. However, the outlook for the remaining year remains dim, with economists forecasting a dip in GDP growth to 5.1% year-on-year in the April-June period, down from 5.4% in the first quarter, as per a Reuters poll.

Investors are keenly watching the upcoming Politburo meeting for signs of new economic policies. Despite the recent softening, experts believe China's GDP could still exceed 5% this year, though growth is expected to decelerate further next year, falling to 4.6% in 2025 and 4.2% in 2026.

(With inputs from agencies.)