China’s economy slows amid consumer caution and rising U.S. tariff risks
China’s economic growth showed resilience in the second quarter, expanding 5.2% year-on-year, slightly better than forecasts, yet underlying pressures suggest a slowdown ahead as consumers tighten spending and U.S. trade tensions mount.
Data released Tuesday revealed a modest deceleration from the 5.4% growth in Q1 but still above the expected 5.1%. Analysts attribute the relatively strong performance to export front-loading ahead of tariff deadlines and government stimulus measures, News.Az reports, citing Reuters.
However, signs of weakness are emerging: retail sales growth cooled to 4.8% in June, the slowest since early this year, while industrial output rose 6.8%, the fastest pace in months.
Consumers like Shenzhen-based doctor Mallory Jiang report pay cuts and financial caution, curbing purchases such as property. Despite stimulus efforts—including infrastructure spending, consumer subsidies, interest rate cuts, and liquidity injections—confidence remains fragile amid uncertainties from U.S. tariffs and ongoing property market challenges.
China’s property sector continues to weigh on growth, with new home prices falling at their fastest monthly pace in eight months and investment contracting sharply in the first half of 2025. Fixed-asset investment grew just 2.8% through June, reflecting cautious business sentiment.
Looking ahead, economists predict GDP growth will slow further to 4.5% in Q3 and 4.0% in Q4, with the full-year growth forecast falling short of the official 5% target. The risk of a sharper slowdown is heightened without stronger fiscal stimulus, as export momentum fades and domestic demand weakens.
Policymakers are expected to debate additional support measures at the upcoming Politburo meeting in late July to address the mounting economic headwinds from deflationary pressures, trade uncertainties, and a faltering property market.
China’s leadership has vowed to accelerate urban village renovations and promote new property development models to stabilize the housing sector, while exporters increasingly seek growth opportunities beyond traditional markets. However, with consumer and business caution prevailing, the path to sustained recovery remains challenging.
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