The International Monetary Fund reduced its forecast for the growth of the Chinese economy during the year 2026 to 4.5 percent, affected by the rise in energy prices as a result of the conflict in the Middle East, the continued weakness of domestic consumption and the real estate sector crisis, at a time when Beijing is trying to maintain the momentum of the second largest economy in the world through stimulus measures and support for advanced industries.
The “World Economic Outlook” report, issued on Tuesday, showed that Chinese growth is likely to slow to 4 percent in 2027, a decrease of 0.1 percentage point from July expectations, while estimates for the current year were slightly lower than previous expectations.
The new revision puts expected growth at the lower end of the Chinese government's official target of between 4.5 and 5 percent, the lowest target range in decades, reflecting the difficulty of achieving a broad economic recovery.
The Fund explained that the rise in global oil prices, the continuing state of uncertainty and structural challenges, will negatively affect economic activity, but stressed that government support is expected to prevent a more severe slowdown.
China faces simultaneous pressures from home and abroad. High energy prices increase production and transportation costs, while weak consumer spending limits companies' ability to expand their sales in the local market.
These pressures are of particular importance to the Chinese economy, which depends on industrial activity and foreign trade, making it sensitive to fluctuations in the prices of raw materials and energy.
The real estate crisis, which has been going on for years, remains one of the most prominent factors hindering recovery. The decline in the sector, which was a major driver of investment and spending, has weakened consumer confidence and increased household caution regarding financial decisions.
The repercussions of the crisis are not limited to real estate development companies, but extend to the sectors of construction, construction materials, home appliances, and housing-related services, making it more difficult for local demand to regain its previous momentum.
On the other hand, exports and advanced technological industries continue to support economic activity, especially the artificial intelligence and electric car sectors, which have become among the most prominent engines of Chinese industrial growth.
However, the strength of these sectors has not yet succeeded in fully compensating for the weakness in consumption and real estate, which reflects the continuing disparity between the strong performance of export-oriented industries and less active domestic demand.
Chinese companies also face increasing trade challenges in foreign markets, especially in the automotive sector, as the European Union seeks to regulate flows of Chinese imports and protect competition within its markets.
This increases the importance of strengthening the local market, to reduce the economy's dependence on exports as a major source of growth.
Beijing is betting on fiscal policies and infrastructure investment to support economic activity. The authorities had announced the allocation of 550 billion yuan, equivalent to about 82 billion dollars, from unused government debt shares to support local governments and complete existing projects.
These measures should alleviate some short-term pressures, but their effectiveness will depend on their ability to improve confidence and stimulate private consumption and investment.
The expectation that growth will slow to 4 percent over the next year indicates that Chinese challenges go beyond the impact of rising energy prices, and include structural imbalances that require long-term reforms.
For investors, indicators of real estate sales, consumer spending, industrial production and exports will remain key factors in assessing the economy's ability to achieve its targets.
The lowering of the IMF's expectations confirms that China is facing a more complex stage of growth, which requires achieving a balance between supporting advanced industries and addressing weak domestic demand.
Although stimulus measures may limit the severity of the slowdown, the sustainability of the recovery will depend on restoring consumer confidence, improving the conditions of the real estate sector, and enhancing the economy’s ability to grow without excessive reliance on government investment and exports.
US President Donald Trump defended the “diesel agreement” with Russia, at a time when lawmakers from both parties, Republican and Democratic, complained that the agreement appeared to violate a US law that bans Russian energy imports until Moscow ends its aggression against Ukraine.
Trump said that the agreement to lift sanctions on Russian oil exports would help reduce high fuel prices. However, some analysts doubted that the amount of diesel that Trump said Russia would provide during the next three months would be sufficient to make a tangible impact on prices, as it is equivalent to only about 12 hours of global fuel consumption.
On Friday, Trump announced Russia's agreement to supply diesel to global markets, saying that his administration had temporarily lifted US sanctions imposed on Russian fuel, which were designed to deprive Moscow of any revenues it might use in its war with Ukraine.
Trump said on Monday evening that the agreement would benefit farmers and ranchers in the United States.
The price of diesel has jumped by more than 60 percent since Trump started a war on Iran 7 months ago, and high prices are now threatening Republicans' chances of maintaining their slim majority in Congress during the midterm elections on November 3.
A group of senators, Republicans and Democrats, asked Trump on Sunday to “undo” the diesel supply agreement with Russia. They said the agreement could violate a law passed in 2022 to support Ukraine in its war efforts against Russia.
“We should be tightening sanctions, not undermining them by allowing Russian diesel imports and risking erasing our influence, damaging our credibility with allies, and emboldening our adversaries,” Republican Senator Jerry Moran said in a social media post.
Trump said that the Ukrainian attacks on Russian oil refineries are a major factor behind the rise in diesel prices.
Trump wrote in a post on social media: “I made the right decision for the American people... Always, America first!”
On Monday, Trump rejected the criticism leveled by some members of the Republican Party of the agreement, while speaking to reporters as he left the White House on a trip to Ohio.
“Well, I guess these Republicans can't really be serious,” he said. “We can impose restrictions on oil, but the rest of the world will be affected very significantly if we do that.”
Trump and Ukrainian President Volodymyr Zelensky exchanged criticism early this week regarding the Ukrainian attacks on Russian refineries. Trump said that Ukraine needs a new president, while Zelensky pledged to hold elections if Russia agreed to a 60-day ceasefire.
Finland is the latest critic
After the European Union's criticism of the "diesel agreement", Finland was the latest European country to criticize the agreement, as Finnish Foreign Minister Elena Valtonen said on Tuesday that providing the Russian "authoritarian" war machine with additional revenues was "not a good idea."
At a forum held in Singapore, Valtonen said, according to Reuters, that the United States, as the leader of the free world, must stand by Ukraine, which she described as having “chosen to be liberated from Russia’s oppression.”
Valtonen added: “The rest of the world should stand with the victim, and certainly those countries that still want to be strong for the principle of freedom.”
The Minister called on European Union member states to stop issuing tourist visas to Russian citizens until Russia ends its war against Ukraine.
Valtonen went on to say: “I hear from all my colleagues in the European Union agreement on this principle, and I am completely certain that all European Union countries will now begin to further tighten restrictions on tourist visas for Russians, especially since Russia is also waging a hybrid war against Europe.”
Russian Deputy Prime Minister Alexander Novak said that Russia will be able to restore diesel exports to levels exceeding those announced by US President Donald Trump under an agreement with Moscow, sparking criticism from Ukraine and some US lawmakers.
On Friday, Trump announced Russia's approval to supply diesel to global markets, saying that his administration had temporarily lifted US sanctions on Russian fuel, which were designed to deprive Moscow of any revenues it might use in its war with Ukraine.
Novak told the state channel “Russia-24”: “We will see how the situation develops, but Russia has the ability to increase diesel fuel exports... By the end of the year, exports may range between 3 million and 3.5 million tons per month, returning to the levels they were before the crisis.”
Russia's diesel exports collapsed due to Ukrainian attacks on oil refineries and Moscow's own restrictions on foreign sales.
Russia has frequently targeted Ukraine's energy infrastructure since it launched a full-scale war in 2022.
Before Ukraine launched a wave of drone attacks on Russian oil refineries during 2024 and 2025, Russia's diesel exports exceeded 3 million tons per month.
Despite Moscow's self-imposed export ban, Russia continued to supply diesel to countries, mostly in Central Asia, under government agreements.
Sources in the sector said, according to Reuters, that Russian diesel exports to Central Asia amounted to 427 thousand tons last month.
