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China’s economy grew by more than 5% in the second quarter of 2025, with official figures released on Tuesday confirming a 5.2% expansion between April and June. The data aligns with predictions from a recent AFP analyst survey, suggesting that stronger-than-expected export performance played a key role in offsetting ongoing global trade tensions.
Despite the positive headline figure, China’s leadership continues to grapple with complex challenges in maintaining economic momentum. A central concern remains the intensifying trade friction with the United States, exacerbated by President Donald Trump’s aggressive tariff policies. Since returning to office in January, Trump has imposed sweeping tariffs not just on China but also on other major global economies. These actions threaten China’s export sector — a pillar of its current growth strategy — especially as domestic consumption remains relatively weak.
Recent diplomatic efforts have attempted to ease the US-China trade rift. Talks in London last month led to a tentative framework for a new trade agreement. However, analysts warn that the path forward is still fraught with uncertainty. On Monday, Trump further escalated geopolitical tensions by threatening to impose tariffs of up to 100% on Russia’s trade partners — including China — if Moscow does not end its war on Ukraine within 50 days. This pressure adds to the already strained economic and diplomatic balancing act for Beijing, which maintains close commercial ties with Russia.
In terms of specific economic indicators, China’s industrial output in Q2 grew by 6.8%, surpassing the 5.6% increase forecasted by Bloomberg analysts. This suggests the manufacturing sector remains a key source of strength. Conversely, consumer activity lagged behind expectations: retail sales rose 4.8% year-on-year, falling short of the 5.3% prediction and signaling that efforts to boost household spending have had limited success.
Sheng Laiyun, deputy director of the National Bureau of Statistics (NBS), described the overall economic performance as stable and resilient. “Despite external pressures and internal hurdles, the national economy maintained a steady upward trajectory,” he said. Sheng emphasized positive trends in production, employment, household income, and the emergence of new growth drivers, reflecting a broader shift toward high-quality development.
Trade figures released on Monday by the General Administration of Customs also contributed to the more optimistic outlook. Exports in June outpaced expectations, bolstered by the recent pause in tariff escalations between Beijing and Washington. Imports also rose 1.1% — beating the modest 0.3% forecast — and posted the first year-on-year increase of 2025.
Customs official Wang Lingjun highlighted the significance of the current US-China trade truce. Speaking at a news briefing, he called the agreement “hard-won” and stressed that “dialogue and cooperation are the only viable paths forward,” warning against threats and coercion in trade negotiations.
Still, economic headwinds persist. Many economists forecast a slowdown in the latter half of 2025, largely due to faltering domestic demand. Consumer prices edged up slightly in June, breaking a four-month deflation streak, but wholesale prices — measured by the Producer Price Index — fell by 3.6% year-on-year, the sharpest decline in nearly two years. This suggests continued weakness in underlying price dynamics.
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Experts continue to urge Beijing to accelerate its transition to a more consumption-driven economic model. Historically, China has relied on heavy infrastructure investment, industrial output, and export growth. While these engines remain crucial, long-term sustainability likely depends on stronger domestic demand. The government has already introduced initiatives to stimulate spending, including a trade-in subsidy program for consumer goods, which had a temporary impact on retail activity.
In conclusion, while China’s Q2 GDP figures indicate resilience amid adversity, underlying challenges — both external and internal — suggest a complex road ahead for policymakers aiming to sustain momentum and rebalance the economy.