Goldman Sachs: Asia’s growth model is entering a rebalancing phase, with resilient external demand and policy easing supporting near-term growth, but tariffs, real estate, and weak consumption creating structural pressure

Overview

This report begins with the global and U.S. macro backdrop and discusses the position of the Asia-Pacific economy amid changes in U.S. policy, tariffs, a weaker dollar, the rate path, and China’s structural rebalancing. The core judgment is that global and U.S. growth foundations remain relatively solid in 2026, regional inflation pressures have eased significantly, but Asia’s traditional growth model relying on exports, manufacturing, and real estate is being reexamined. China still relies on exports and supply-side policies, and the property adjustment is not yet fully over; other Asian economies are diverging between resilient tech exports, tariff shocks, and competition from China.

Core views

The report believes that U.S. and global growth may remain solid in 2026, the Fed still has room for further rate cuts, and a weaker dollar is an intended result of the new policy mix. In China, the pattern of exports outperforming domestic demand is expected to continue; the steepest phase of the property downturn may have passed, but construction, home prices, and domestic demand have not yet bottomed, and policy support is nearing while stimulus remains relatively conservative. In Asia ex-China, exports will simultaneously face U.S. tariffs and Chinese supply competition, with tech-related exporting economies relatively better positioned; inflation has fallen significantly in most economies, and the rate-cutting cycle is approaching its end. Inflation in Japan is closer to normalization, and the BOJ may still raise rates gradually; the policy backdrop in South Korea is improving, domestic policy drag in India is easing, and Indonesia still faces insufficient growth.

Analysis framework

The report combines multidimensional data including macro forecast tables, policy rate and exchange-rate forecasts, fiscal and monetary policy proxy indicators, export shares, real estate activity, labor markets, household income, inflation, and financial conditions to compare the growth and policy paths of the U.S., the world, China, and major Asia-Pacific economies, and provides perspectives on rates, foreign exchange, and equity strategy in the appendix.

Methodology notes

• Macroeconomic ForecastingGDP and Inflation Forecast Framework

  Uses annual averages, Q4/Q4, consensus forecasts, and GS forecasts to compare growth and inflation paths across major economies.

  This framework is used to judge whether regional growth in 2026 is above or below market consensus and to identify whether inflation supports further monetary easing.

• Policy AnalysisPolicy Impulse and Financial Conditions

  Assesses the marginal impact of macro policies on growth through fiscal easing, rate changes, exchange rates, equities, and credit conditions.

  The report treats U.S. fiscal impulse, Fed easing expectations, China’s fiscal and monetary policy, and South Korea’s financial conditions as key variables for judging near-term growth stability.

• Structural AnalysisRebalancing Between Exports and Domestic Demand

  Compares exports, real estate, consumption, employment, and income indicators to assess whether Asia’s growth model remains sustainable.

  The report emphasizes that China has strong exports but insufficient domestic demand, while other Asian economies are diverging between tech exports and tariff shocks.

• Market StrategyRates and FX Scenario Forecasting

  Provides forecasts for major Asian currencies and policy rates over 3-month, 6-month, and 12-month horizons.

  This method is used to connect macro judgments with tradable assets such as the renminbi, won, yen, Asian rates, and regional equity allocation.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China macro assets and the renminbi

  Highly relevant to the report’s core themes, reflecting export resilience, property adjustment, fiscal and monetary easing, and exchange-rate competitiveness.

  Strengths

  Rising export share, strong current account surplus, and continued room for policy support, with the USDCNY forecast pointing to 6.85.

  Weaknesses

  The drag from real estate has not faded, while weak consumption, soft employment, slowing income growth, and low inflation weigh on domestic demand.

  Comparison

  Compared with the U.S. and some Asian tech-exporting economies, China’s growth relies more on external demand and supply-side support.

  Risks

  Tariff escalation, weaker external demand, continued declines in property prices, and insufficient policy stimulus.

• Asian tech-exporting economies

  The report believes growth prospects in Asia ex-China are diverging, with tech-exporting economies relatively better supported.

  Strengths

  Demand for semiconductors and technology products supports export performance in South Korea, Taiwan, and others.

  Weaknesses

  Growth is concentrated in a relatively narrow range of export categories, while domestic demand and non-tech manufacturing may remain weak.

  Comparison

  Compared with non-tech-exporting economies, the tech chain is better positioned to benefit from global capital spending and AI-related demand.

  Risks

  U.S. tariffs, a downturn in the global electronics cycle, and supply competition from China.

• Japanese rates, yen, and JGBs

  Japan’s inflation normalization and gradual BOJ rate hikes are major policy themes of the report.

  Strengths

  Services prices and wage dynamics are relatively stable, and nominal GDP remains in positive growth territory.

  Weaknesses

  Real growth remains weak, and rising long-term yields could weigh on fiscal conditions and risk assets.

  Comparison

  Unlike most Asian central banks, which are nearing the end of their rate-cutting cycles, Japan is moving in the direction of gradual rate hikes.

  Risks

  Inflation not easing as expected, yields rising too quickly, and fiscal policy uncertainty.

• India macro assets

  India remains a high-growth economy but faces the external headwind of U.S. tariffs.

  Strengths

  Credit growth has stabilized after policy-induced slowing, the drag from fiscal tightening has largely passed, and inflation is within the target range.

  Weaknesses

  The 2026 growth forecast retreats from the high level of 2025, and high tariffs pressure exports and investment sentiment.

  Comparison

  Compared with China, India has a stronger domestic-demand foundation; compared with some ASEAN economies, its growth level remains higher.

  Risks

  Tariff shocks, insufficient room for policy easing, and disruptions from food or energy prices.

• Asian rates and FX strategy

  The report appendix provides regional policy rate and exchange-rate forecasts, linking macro views with market trading.

  Strengths

  Easing inflation gives some economies limited room for easing, and a weaker dollar is supportive for some Asian currencies.

  Weaknesses

  Most rate-cutting cycles are already nearing their later stage, leaving limited room for further declines in rates.

  Comparison

  The U.S. still has room to cut rates, Japan is leaning toward hikes, while China and some ASEAN economies still have room for moderate easing.

  Risks

  A more hawkish Fed path, renewed dollar strength, capital outflows, and changes in geopolitics and trade policy.

Key data

• U.S. real GDP growth forecast for 20262.8%GS forecasts above the 2.1% consensus, reflecting support from accommodative policies, technology investment, and improving financial conditions.
• Global real GDP growth forecast for 20262.8%The report believes global growth will remain relatively solid, with tariff shocks partly offset by other policy and financial factors.
• Asia ex-Japan real GDP growth forecast for 20264.8%Below the 2025 GS forecast of 5.1%, but above the 2026 consensus of 4.6%.
• China real GDP growth forecast for 20264.8%Above the 4.5% consensus, but the report emphasizes that growth remains tilted toward exports and the supply side, while domestic demand is still weak.
• India real GDP growth forecast for 20266.7%Below 2025’s 7.6%, but the drag from earlier credit and fiscal tightening has largely faded.
• Asia ex-Japan CPI forecast for 20261.3%Inflation is generally at a low level, and the regional rate-cutting cycle has mostly entered its later stage.
• China CPI forecast for 20260.6%Low inflation and producer price pressure indicate domestic demand remains weak.
• China year-end 2026 7-day OMO rate forecast1.20%The report expects China’s monetary policy to retain room for moderate easing.
• China expanded fiscal deficit forecast for 202612.2% of GDPHigher than the 2025 forecast of 11.0%, used to limit further growth slowdown.
• 12-month USDCNY forecast6.85The report believes the renminbi’s real depreciation had enhanced export competitiveness, while the forward forecast points to relative RMB strength.
• U.S. policy rate forecast for Q4 20263.13%Consistent with the report’s view of two more Fed rate cuts by mid-2026.
• Japan policy rate forecast for Q4 20261.00%With Japanese inflation near or above the 2% target, BOJ rate hikes are expected to remain gradual.

Impact & implications

For investors, the implication of the report is not simply to be bullish or bearish on Asia, but to emphasize intra-regional divergence and asset selection. External demand and the technology chain can still support some economies and markets, but tariffs, a weaker dollar, Chinese supply competition, and weak Chinese domestic demand will reduce the certainty of the traditional export-led growth model. On rates, easing room is shrinking for most Asian central banks, while Japan is moving toward rate hikes; on FX, a weaker dollar and policy differences across countries will be key drivers of Asian currency performance.

Risks

• U.S. tariffs have a greater-than-expected impact, weakening Asian export demand.
• China’s property construction activity and home prices have not yet bottomed, continuing to drag on domestic demand and confidence.
• China’s policy stimulus remains conservative, making it difficult to fully reverse weak consumption and employment.
• The dollar’s path and the pace of Fed easing fall short of expectations, triggering volatility in Asian FX and rates.
• Japan’s long-term yields continue to rise rapidly, amplifying pressure on fiscal conditions and financial markets.
• If the tech export cycle cools, growth in economies such as South Korea and Taiwan may slow markedly.

What to watch

• Whether the Fed cuts rates two more times by mid-2026 as expected.
• The actual impact of U.S. tariff policy on exports from economies such as China, India, Thailand, and Vietnam.
• Whether China’s property sales, housing starts, home prices, and inventory destocking are bottoming.
• Whether China’s fiscal policy, 7-day OMO rate, RRR, and housing policy are eased further.
• Whether Asian inflation stays near target and whether central banks formally end their rate-cutting cycles.
• The pace of BOJ rate hikes, JGB yields, and the yen’s trajectory.
• Whether South Korea’s semiconductor and technology product exports continue to contribute the bulk of growth.