China's Economy Surpasses Growth Expectations Amid Trade Tensions
Beijing, Wednesday, 16 July 2025.
China’s GDP grew 5.2% in Q2 2025, exceeding forecasts despite U.S. tariffs. Strong industrial exports and government stimulus have driven growth. Challenges remain in domestic demand and real estate.
Strong Performance Despite Headwinds
China’s economy posted a 5.2% year-on-year growth in Q2 2025, a figure that exceeded forecasts of 5.1% and marginally lower than the 5.4% growth registered in Q1 2025 [3][6]. The growth rate achieved reflects a resilient economic performance amid persistent U.S. trade tariffs which continue to affect export-focused sectors. President Trump had imposed tariffs as high as 145% during late April to early May 2025, but negotiations have since reduced these to 30% for a temporary period. This has allowed a front-loading of exports ahead of anticipated tariff reimpositions [3][4].
Industrial Output and Trade Adjustments
China’s industrial production has shown robust results, increasing by 6.8% year-on-year in the second quarter, supported by strong demand for exports primarily from regions such as Southeast Asia and the European Union, while exports to the U.S. decreased by 10.9% [6]. Analysts note that China’s export diversification strategy has been instrumental in mitigating U.S. trade tensions, particularly with exports re-directed through different trade routes [1][6].
Domestic Challenges and Real Estate Woes
Despite the positive GDP growth, domestic challenges persist, particularly in the consumption and real estate sectors. Retail sales growth slowed to 4.8% in June 2025, a significant drop from May’s 6.4%, highlighting a tentative consumer market [2][6]. The property market remains a substantial drag on growth with investment declining by 11.2% year-on-year in H1 2025, highlighting ongoing instability in the housing sector [6][3].
Future Prospects and Policy Directions
Policymakers in Beijing are poised to address these challenges with anticipated stimulus measures expected to be discussed in the upcoming Politburo meeting scheduled for late July 2025. Analysts anticipate that these measures will aim to stabilize growth, particularly through fiscal interventions targeted at bolstering consumer spending and addressing real estate sector vulnerabilities [2][4]. The economic outlook for H2 2025 remains cautious, with growth risks heightened by potential escalation in U.S. tariffs and ongoing geopolitical tensions [4][6].