Bank of America expects a rebound in mainland fixed asset investment next year, with the RMB appreciating to 6.8

Mainland China's industrial retail and fixed asset investment data for November fell short of expectations. Bank of America Global Research expects that demand in mainland China will slightly rebound next year and the year after, at which point net exports will play a less important role compared to 2025. The bank anticipates a rebound in overall fixed asset investment next year, with retail sales performing relatively well against the backdrop of policies emphasizing domestic demand. As for fiscal policy, it is expected to maintain its current proactive stance, while monetary policy will remain moderately accommodative.

The bank predicts that fixed asset investment in mainland China will decline by 2% for the year, with rebounds of 3.5% and 4% expected in the next two years, respectively. Retail sales are expected to rise by 3.5% for the year, with rebounds of 4.2% and 4.6% in the next two years, respectively.

The bank expects two interest rate cuts in mainland China next year, each by 10 basis points, meaning a 20 basis point reduction in the seven-day reverse repurchase rate, with the policy rate cut likely occurring in the spring of next year. Additionally, the bank forecasts that the RMB exchange rate will rise to 6.8 by the end of next year and may reach 6.7 the year after.

Earlier, the bank raised its economic growth forecast for China this year from 4.7% to 5%, and adjusted next year's forecast to 4.7%. At the same time, it expects Hong Kong's economic growth to be 3.2% this year, slowing to 2.5% next year