China’s economy grows 5.3% amid headwinds

The Chinese economy grew 5.3 per cent year-on-year in the first half of 2025, defying global headwinds and providing a solid basis for the full-year growth target of around 5 per cent to be reached.

Analysts said they expect the momentum to continue in the second half of the year, given the government’s ample policy room and tools, steady recovery in domestic demand and the resilience in exports.

China’s top leadership may sharpen its focus on maintaining economic stability and restoring market confidence, with strong fiscal stimulus and further monetary easing to stimulate domestic demand and cushion against external headwinds, they said.

China’s GDP rose 5.2 per cent year-on-year in the second quarter of this year, compared with a rise of 5.4 per cent in the first quarter, the National Bureau of Statistics said.

Foreign trade grew 2.9 per cent year-on-year to 21.79 trillion yuan (£2.27 trillion) in the first half of the year, the General Administration of Customs said.

“The Chinese economy posted a solid first half, supported by resilient exports,” said Louise Loo, lead economist at British think tank Oxford Economics.

“Sequential GDP growth moderated in the second quarter, but still allowed first-half growth to reach 5.3 per cent — comfortably above the official 5 per cent full-year target.”

China’s value-added industrial output grew 6.8 per cent year-on-year in June, after a 5.8 per cent rise in May, and retail sales — a key measurement of consumer spending — rose 4.8 per cent year-on-year in June, compared with a rise of 6.4 per cent in May.

Fiscal policy is likely to take the lead in supporting growth because robust government bond issuance in June suggests stimulus is being ramped up, Loo said.

“We anticipate this will include renewed funding for the trade-in programme, given its more immediate impact on demand,” she said.

Final consumption accounted for 52 per cent of China’s economic growth in the first half of the year, the statistics bureau said. In the second quarter final consumption contributed 52.3 per cent to economic growth, a little more than in the first quarter.

“These figures indicate that domestic demand, particularly consumption, remains the primary driver of GDP growth,” said Sheng Laiyun, deputy head of the bureau.

Retail sales rose 5 per cent year-on-year in the first half of 2025, compared with 4.6 per cent in the first quarter, the bureau said.

“The upward momentum seen in consumption in the first half is likely to carry into the second half,” Sheng said, noting that new rounds of consumption-boosting stimulus measures, including subsidies, are already being rolled out.

“Authorities are accelerating the rollout of policies for the second half of the year. China’s policy toolbox remains ample, and it is strengthening policy reserves, with new measures to be introduced as needed in response to market changes.”

Given China’s robust first-half performance, Ming Ming, chief economist at CITIC Securities, said the second-half policy efforts are likely to focus on innovating policy tools.

“Efforts will likely target key areas in the economy, including supporting property destocking, further developing the service sector and boosting consumption.”

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International in Beijing, said that China is likely to step up “unconventional” countercyclical adjustments in the second half to cushion external pressures.