China’s Economic Outlook Wavers: PMI Weakness and Trade Tensions Dominate

China GDP Growth 6


DeepSeek Outpaces ChatGPT, Global Markets React Sharply

On January 27, DeepSeek, a low-cost Chinese AI platform, surpassed ChatGPT on Apple’s App Store downloads, triggering a market sell-off. The rise in popularity questioned the need for significant spending to roll out AI products.

US tech giants Nvidia (NVDA) and Broadcom Inc. (AVGO) tumbled 16.97% and 17.40%, respectively. The crypto markets also succumbed to the news, with bitcoin (BTC) falling to a session low of $97,768 before rebounding.

US President Trump’s initial response to the market reaction was subdued, reportedly saying,

“The release of DeepSeek, AI from a Chinese company should be a wakeup call for our industries that we need to be laser-focused on competing to win.”

However, the administration may use tariffs as leverage to support Silicon Valley. How China handles Trump’s rhetoric could set the tone for 2025.

US-China Relations Crucial for Consumer Sentiment

Meanwhile, US-China relations may also influence China’s consumer sentiment. A US-China trade war could initially drive nationalist sentiment, boosting demand for domestic brands. Under this scenario, Beijing’s consumption-targeted stimulus measures may bolster China’s economy.

However, prolonged tariffs may undermine consumer confidence, curbing discretionary spending and impacting the economy. Under this scenario, consumption-targeted stimulus could become less effective, exposing China’s economy to the global demand environment.

Conversely, stable US-China relations could boost consumer spending, supporting China’s transition to a more consumption-driven economy. Near-term unemployment trends could be crucial. January’s NBS PMI data may fuel concerns about job security. However, the upcoming Caixin PMI data will give greater insights into private sector conditions.



This article was originally published by a www.fxempire.com

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