China’s Economic Growth Shows Resilience, But Second-Half Outlook Remains Clouded

China’s economy grew at a slightly faster-than-expected pace in the second quarter, signaling continued resilience despite rising global trade tensions and persistent domestic headwinds. However, analysts caution that faltering consumer confidence, weak private demand, and ongoing property market stress will likely intensify pressure on Beijing to introduce further stimulus measures.

Gross domestic product (GDP) expanded by 5.2% year-on-year in the April–June period, according to data released Tuesday by the National Bureau of Statistics. This marks a deceleration from the 5.4% growth recorded in the first quarter but modestly surpassed market expectations of 5.1% in a Reuters poll. On a quarterly basis, GDP rose 1.1%, compared to 1.2% in the previous quarter and ahead of a projected 0.9% increase.

While the headline figures indicate stability, the underlying economic picture remains mixed. China's growth trajectory has been buoyed in part by proactive policy support and a temporary boost in exports, as manufacturers front-loaded shipments amid a fragile truce in the U.S.–China trade standoff. Yet analysts anticipate a more challenging second half as that momentum wanes.

“Despite a strong first half, the outlook for the remainder of the year is likely to deteriorate as export front-loading fades and the impact of U.S. tariffs becomes more pronounced,” said Wei Yao, chief economist for Asia Pacific at Société Générale. “Weakening home prices and the diminishing effect of earlier subsidies also raise concerns about the sustainability of the recovery in household consumption.”

For many Chinese households, the macroeconomic gains are yet to translate into financial relief. “Both my husband and I have faced pay cuts this year, and we still don’t feel confident enough to buy a home,” said Mallory Jiang, a 30-year-old doctor in Shenzhen. “We’re cutting back—taking public transport, eating at work, cooking at home. Financial pressure remains high.”

Stimulus in Focus as Politburo Meeting Looms

With consumer sentiment subdued and structural deflationary pressures deepening, market participants are closely watching the upcoming Politburo meeting, expected later this month, for signals of further policy action. Beijing has already deployed a combination of infrastructure spending, monetary easing, and consumer subsidies to support growth. In May, the central bank cut key interest rates and injected liquidity into the financial system to help offset the impact of U.S. tariffs imposed under President Donald Trump’s administration.

Still, many economists argue that such measures may fall short of reversing the broader slowdown. “Stimulus alone may not be sufficient to counteract entrenched deflation,” said Zichun Huang, China economist at Capital Economics. “Exports are likely to weaken further, and the fiscal support that helped in the first half is expected to taper off.”

Retail sales growth—a key barometer of domestic consumption—slowed to 4.8% year-on-year in June from 6.4% in May, marking its lowest level since the start of the year. Meanwhile, producer prices fell at their steepest pace in nearly two years, underlining sustained deflationary pressures.

Industrial output rose 6.8% in June, its strongest performance since March, offering a partial offset. However, fixed-asset investment increased by just 2.8% in the first half of the year, down from 3.7% in the January–May period, reflecting broader uncertainty in the private sector.

Property Sector Drag and Export Risks

The beleaguered property sector continues to weigh on China’s economic performance, despite multiple rounds of policy support. Real estate investment declined significantly in the first six months of the year, while new home prices in June posted their steepest monthly drop in eight months.

In response, top policymakers have reiterated their commitment to accelerate urban village renovation and develop a new model for property development, according to state media reports.

Analysts at ANZ noted that although they have revised their 2025 GDP growth forecast upward to 5.1% (from 4.2%), they continue to identify deflation as the principal risk to China’s outlook. The latest Reuters poll projects growth to slow to 4.5% in Q3 and 4.0% in Q4, with full-year expansion expected to fall short of Beijing’s official 5% target.

The outlook for 2025 is similarly cautious, with economists forecasting GDP growth to moderate to 4.6%, and to further decelerate to 4.2% by 2026.

“Q3 growth is at risk without stronger fiscal stimulus,” said Dan Wang, China director at Eurasia Group. “Both consumers and businesses are becoming more cautious, and exporters are increasingly turning abroad to find new markets.”

Even as export activity showed a modest rebound in June, driven by manufacturers racing to capitalize on the current tariff reprieve before a possible August escalation, the broader trade environment remains uncertain.

As China contends with a confluence of domestic fragilities and external pressures, the next phase of economic policymaking will be critical in determining whether the country can maintain momentum or faces a sharper deceleration.