Kimberly Kirkendall’s clients have been waiting years for a sense of normalcy in Asian economies.

Often, they are hoping that “after the next [US Federal Reserve Board] meeting [or] the next meeting between China and the US, things will stabilise”, explained Kirkendall, a consultant focused on international operations and supply chain, and president of consultancy International Resource Development.

But the “roller coaster” of the last few years shows no signs of slowing in 2026, she said.

Kirkendall and other experts interviewed by Financial Management said that while growth in China and other Asian economies is poised to continue, the 2026 Asia economic outlook will be shaped by ongoing trade wars, complex changes in international investment patterns, and patches of doubts and weakness.

“I think people want to believe we’re off of [the roller coaster] with the present stabilisation of tariff rates,” said Kirkendall. “I think the volatility will continue.”

But she added: “We still overall expect Southeast Asia … India, and Asia in general to be a driver of growth economically in the world. There is still a lot of investment by not only European and American and North American companies in those regions, but also inter-region investment.”

The China growth forecast for 2026

China remains the dominant economy and driver of growth in Asia. Its outlook is darkened by domestic economic woes and US tariffs, but it could be buoyed by government stimulus and resilience in the tech sector.

China’s economic outlook is “resilient but tempered by structural headwinds”, said Bing Mei, CPA, CGMA, the CFO of an investment company listed on HKEX — the Hong Kong Stock Exchange.

A range of projections suggest the country’s GDP could expand by about 4.5% in 2026, a decrease from 2025. The World Bank Group estimates 4.9% growth for 2025 and projects 4.4% growth for 2026. China officially reported 5% growth for 2025.

“Investor sentiment toward China-based firms remains cautious — weak domestic demand, geopolitical risks, and sluggish recovery have dampened enthusiasm. However, there’s a notable rebound in IPO activity, particularly in Hong Kong, driven by tech and AI sectors. This momentum extends to policy-driven sectors like electric vehicles (EVs) and batteries, where China continues to dominate globally,” Mei said. That category includes many advanced manufacturers serving major policy goals outlined in China’s 15th Five-Year Plan (2026–2030), focusing on high-tech areas such as AI, quantum technology, biomanufacturing, aerospace, and new energy.

US President Donald Trump’s tariffs on imports from China and other countries has had an effect.

While China’s exports overall were up 5.5% last year and 6.6% in December, exports to the US in 2025 were down 20%. Kirkendall recently visited factories in China that make steel and aluminium components used in furniture and equipment. She said one, serving Europe and the US, was operating at about 30% of capacity, while another large factory was closer to 60%.

“For them to be down at all is unusual,” Kirkendall said. A meeting between Trump and China’s President Xi Jinping in October also yielded at least a temporary reprieve in tariff rates — though Kirkendall said business leaders should be prepared for more volatility.

China also continues to see a domestic economic drag from the deep downturn in its property markets, which may be slowing spending on travel, retail, and leisure.

“Real estate prices in China have softened tremendously, in some large cities by 50%,” Kirkendall said. “And a lot of Chinese consumers, the majority of their wealth is in real estate. For those property values to drop that dramatically is really destabilising for a lot of people’s planning for retirement, for their kids.”

On the other hand, China’s government in recent months has pledged a “stronger and proactive fiscal policy” to support growth through 2030, Bloomberg reported.

And while tariffs have heavily affected lower-margin goods like toys and clothes, Chinese exports have been buoyed by China’s strong position in more expensive technology and automotive products.

Asia’s supply chain diversification

The coming year could see more shifts in how and where manufacturing companies invest around Asia. Since 2018, many companies have tried to spread their manufacturing investments beyond China. They were motivated initially by tariffs and then by supply chain shocks during the COVID-19 pandemic.

Some shifted their focus to countries like Bangladesh, Mexico, and Vietnam, especially for “low-skilled, labour-intensive products such as mass-market furniture”, according to the Rhodium Group. Others adopted a “China+1” strategy, keeping China as a base while branching out elsewhere.

The result: China’s share of US imports dropped from 21.6% to just 13.4% over seven years, Rhodium reported, while foreign investment in other manufacturing hubs surged.

Mei said those diversification efforts are continuing or accelerating in countries like India, Malaysia, and Vietnam. “This creates opportunities for us in cross-border deals, though it pressures our China-centric portfolio,” he said.

Mark Clayton, FCMA, CGMA, CPA (Aus), is group CFO of original equipment manufacturer C2W, or China 2 West, a British-owned company that operates a factory in Zhuhai in China’s Guangdong province. US and European companies are changing their buying strategies in China, he said.

“They’re asking for China-plus-one options, building dual supply chains, and being more tactical with inventory rather than doing big … orders. Demand is decent in value terms, but more fragmented: smaller, more frequent orders, higher quality expectations, tighter payment terms,” Clayton said.

He added that other countries are “plugging themselves into Chinese-led supply chains”, with China acting “as the hub for complex components and engineering, with final assembly or secondary processes taking place in places like Vietnam or India”.

But migrating manufacturing isn’t easy. In some cases, the “countries they were shifting to didn’t have the skilled labour, they didn’t have the investment necessary,” Kirkendall said. That was especially true for more advanced manufacturing, as Rhodium found.

Companies “often went back to China”, Kirkendall added, “but then the tariffs hit.”

Clayton similarly sees that companies that started to expand elsewhere in Asia are “returning to China due to lack of manufacturing depth in other countries”, even if it means higher prices.

As a result, companies in 2026 will have to decide whether and how to respond to the latest disruptions. Some may keep building capacity in smaller countries, while others may bet that easing tensions between China and the US will last. A few could shift more investment back to China or settle on a “China-plus-one” strategy.

“Large corporations plan on very long-term horizons, and the last five years have not been friendly to that,” Kirkendall said.

The outlook beyond China

India looks to be one of the fastest-growing Asian economies for 2025, and that may continue in 2026, Mei said.

The country has faced brutal 50% tariffs at times in 2025 — but into 2026 hopes of a deal with the US were growing, and towards the end of January, India and the EU announced a trade deal.

India’s economic expectations are relatively strong. Deloitte forecasts growth between 7.5% and 7.8% for India in the fiscal year that concludes in March 2026.

“While higher US tariffs could weigh on exports and manufacturing in subsequent quarters, domestic demand should continue to drive growth, supported by easing inflation, [goods and services tax] rationalisation, and continued policy support,” Deloitte analysts wrote at the end of October.

Vietnam also has seen especially robust growth through 2025, Mei noted.

“Overall, China offers scale and stability for our operations, but emerging markets like India and Vietnam present higher-growth alternatives for diversification, which we’re actively exploring in our [private-equity] strategy,” Mei said.

Kirkendall has similarly high expectations for Cambodia, India, and Vietnam.

“They have room to take in that investment and improve their skillsets and capabilities and growth,” she said. Those countries’ economies are “looking positive going into 2026”.

More developed Asian economies could see slower growth and deceleration. Mei expects that Singapore and Hong Kong could grow at 2% to 3%, while Japan and South Korea could decelerate “due to mature economies and export vulnerabilities”.

Vigilance and innovation

The unceasing changes and challenges of Asia’s economies are spawning new industries and products, Kirkendall said.

For example, shipping companies are investing in technologies like disposable or collapsible containers, hoping to counter some of the logistical challenges that come with rapid changes in where goods are produced.

In a similar way, finance leadership strategies must be agile and innovative, including hiring data scientists to better track a fast-changing global market.

“Now, you have to really have a finger on so many different pulses,” Kirkendall said.

“Overall, tariffs and policy shifts haven’t stopped business, but they’ve made everyone more cautious and strategic,” Clayton noted. “Buyers are now thinking not just about price, but about risk, optionality, and, importantly, the stability of supply, and that’s become a core part of the conversations we have every day.”

Andrew Kenney is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Oliver Rowe at Oliver.Rowe@aicpa-cima.com.

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“AICPA & CIMA Business Resilience Toolkit — Levers for Action”, FM magazine, 23 July 2025

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