China’s GDP Growth Defies Global Economic Challenges
China’s economy expanded by 5.2% in the second quarter of 2025. This growth surpassed global analysts’ expectations despite ongoing trade tensions and tariffs imposed by the United States. The steady economic performance marks China’s resilience amid structural challenges and shifting global trade patterns.
Recent Economic Performance
China’s GDP growth in Q2 2025 was 5.2%, following a 5.4% increase in Q1. These figures exceeded market estimates of around 4.5%. The country is on track to meet its annual growth target of approximately 5%. Manufacturing output and industrial production remained robust. Exports rose overall despite a 26% drop in shipments to the US, compensated by higher exports to ASEAN, Africa, and the EU.
Structural Challenges in China’s Economy
China’s growth has slowed compared to its three-decade boom driven by manufacturing and exports. The economy faces structural imbalances due to heavy reliance on exports and a real estate sector that has recently collapsed. The downfall of Evergrande, a major real estate company, triggered a crisis affecting consumer confidence and domestic demand. Real estate remains part of household wealth, and its decline has increased unemployment, particularly youth unemployment which reached over 20%.
Deflationary Pressures and Economic Impact
China is experiencing deflation, with falling prices year-on-year. Deflation discourages consumer spending as buyers delay purchases expecting lower prices later. This creates a vicious cycle of reduced demand, lower production, and economic stagnation. Deflation is harder to combat than inflation because traditional policy tools like interest rate cuts and government spending have limited effect once rates are low.
Global Trade and Policy Responses
The pandemic exposed risks of overdependence on China in global supply chains. Many countries adopted a China+1 strategy to diversify their manufacturing bases. The US continued tariffs and introduced policies like the CHIPS Act to strengthen its semiconductor industry and curb China’s technological rise. Between 2021 and 2024, the US economy grew faster than China’s, increasing the gap in GDP size.
Credibility of China’s Economic Data
Scepticism surrounds the accuracy of China’s official GDP figures due to limited transparency. However, recent research by economists affiliated with the US Federal Reserve suggests that China’s official growth data have not been overstated in recent years. This lends more confidence to the reported steady growth despite external pressures.
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