In China, in the first two months of the current year, growth in consumption, investment, and industrial production was recorded, which exceeded initial expectations regarding the dynamic of the corresponding indicators.
The mentioned data shows that the economic system of the Asian country is stable. At the same time, the positive results of the first two months of 2025 do not negate the fact that the specified system still needs additional incentives to ensure a sufficient level of growth. It is also worth noting that the tightening of Washington’s trade policy, which has affected Beijing, worsens the prospects for the Chinese economy, which is the second-largest in the world. In this context, an important circumstance is that exports last year were one of the main driving forces behind the upward dynamic of China’s gross domestic product (GDP). It is obvious that the tariffs imposed by the administration of the President of the United States, Donald Trump, will reduce Beijing’s ability to earn on external shipments of products.
At the same time, negative circumstances and not the most optimistic prospects do not negate the fact that China has nevertheless achieved certain positive results in terms of economic indicators. This means that Beijing’s economic growth-focused policy, which began in September, has already generated an upward momentum for the Asian country’s GDP.
At the same time, the Chinese property market continues to be under pressure. The unemployment rate in the Asian country is on an upward trajectory. This dynamic is a sign of the vulnerability of the Chinese economy, which is strong but needs to bolster its sources of growth. There is currently no definitive understanding of the magnitude of the impact of tariffs from the United States on the Asian country’s manufacturing sector. With the highest degree of probability, Beijing will not be able to completely avoid the negative consequences of Washington’s tightening trade policy measures. At the same time, China may try to reduce the impact of the relevant factor.
Retail sales in the Asian country in the first two months of the current year reached the highest level since October. The relevant data was published by the National Bureau of Statistics last Monday, March 17th. Industrial output in China in the first two months of 2025 showed growth that exceeded the preliminary expectations of analysts surveyed by the media about the pace of the upward dynamic of this indicator.
The increase in fixed-asset investment for the mentioned period in the Asian country turned out to be the fastest since the gain in January-April 2024.
Lynn Song, chief economist for Greater China at ING Bank, said significant uncertainty remains and noted that upside and downside risks are currently roughly evenly balanced.
It is worth noting that investors as a whole did not show enthusiasm against the background of generally positive data for the first two months of 2025. Chinese stocks traded in a narrow range. The benchmark CSI 300 Index was 0.2% lower at the close.
China’s 10-year bonds extended declines on Monday. The yield increased by seven basis points to 1.895%. For futures contracts on the 30-year debt, Monday turned out to be the worst day since the beginning of the current year.
Industrial output in the Asian country showed growth of 5.9% in the first two months of the present year. At the same time, analysts interviewed by the media predicted that the mentioned indicator for the specified period in China would increase by 5.3%.
It should be clarified that in this case, it implies the growth of figures in annualized terms.
Retail sales in the Asian country increased by 4% in January-February of the current year. Analysts interviewed by the media predicted that the mentioned indicator in China would grow by 3.8% in the first two months of 2025.
Fixed-asset investment in the Asian country rose by 4.1% in January-February of the current year. Analysts interviewed by the media expected this indicator in China to grow by 3.2% over the mentioned period.
Property investment in the Asian country showed a significant decrease of 9.8% in the first two months of the current year. Analysts interviewed by the media in this case also predicted a drop in the indicator, but more moderate. They expected that property investment in the Asian country would decrease by 8.9% in January-February of the current year.
The urban jobless rate in China after the completion of the first two months of 2025 was fixed at the 5.4% mark. Analysts interviewed by the media predicted that this figure would be 5.1%.
The data released on Monday reflect a kind of specificity of the existence of the Asian country’s economic system after the President of the United States, Donald Trump, tightened US trade policy measures, which actually marked the beginning of a new trade war between Washington and Beijing. The positive data for the first two months of 2025 demonstrate what can be described as an interim situation at a time when the economic confrontation between the mentioned capitals is still gaining momentum. This means that Beijing has yet to face the main burden of Washington’s tightening trade policy.
Currently, the cumulative tariff from the United States on goods imported from an Asian country is 20%. It is worth noting that China has already decided on retaliatory measures against the US after the measures imposed by the administration of Donald Trump. The Asian country raised levies on imports of agricultural products and food from the United States for $21 billion.
Beijing has decided on additional duties of 15% for chicken, wheat, corn, and cotton shipped from the US. Extra 10% tariffs were also imposed on imports of soybeans, sorghum, pork, beef, aquatic products, fruits, vegetables, and dairy products from the United States.
China is currently implementing an expanded subsidy program for consumers and businesses that trade old equipment. Appropriate measures contribute to an increase in demand. At the same time, the front-loading of shipments by exporters is propping up manufacturing.
Recently, the Chinese authorities have increasingly been paying attention to the increase in consumption. This year, the mentioned goal is a top priority for Beijing as a political center in the context of its approach to economic development. China is currently seeking to make a kind of shift. In this case, it does not provide for a radical abandon from the past conception, but envisages still in fact a rejection of the previous economic approach of the Asian country, which stipulated a supply-side orientation. Instead, according to media reports, China intends to start following an approach driven by both demand and supply.
On Monday, during a speech at a press conference in Beijing to present a plan to rekindle domestic demand, a deputy head of China’s top economic planning agency said that the Asian country’s latest efforts will also rely on measures to promote households’ income and boost their spending power.
An official of the People’s Bank of China, who also participated in the mentioned press conference, stated that the financial regulator is also studying the possibility of aiding consumers by offering financial assistance and creating new policy tools to increase low-cost support.
Senior economic officials of the Asian country claim that they have enough opportunities to act in the face of uncertainty and risks. The corresponding collective statement was made after Beijing officially set the economic growth target for 2025 at about 5% mark.
Lynn Song expects policy support in China to continue. The corresponding assumption is based on the belief that the mentioned measures are necessary to offset the impact of the tightened tariff policy of the United States on the growth of the world’s second-largest economy in the current year. Lynn Song has revised its forecast for an increase in the Asian country’s GDP by 2025 against the background of data released on Monday. Lynn Song currently predicts that China’s economy will grow by 4.7% in the present year. The previous version of the expert’s projection provided that the Asian country’s GDP would increase by 4.6% in 2025.
Experts at Australia & New Zealand Banking Group also revised its forecast for the growth of the world’s second-largest economy in the current year. In this case, the data published on Monday also became a factor impacting the decision to change the vision of China’s GDP prospects in 2025. The new version of the forecast from Australia & New Zealand Banking Group predicts that the Asian country’s economic system will show growth of 4.8% in the current year. The previous version of the projection contained the expectation that China’s GDP would increase by 4.3% in 2025.
The media claim that the National Bureau of Statistics combined data for January and February to smooth out distortions caused by the irregular timing of the Lunar New Year holiday.
Jacqueline Rong, chief China economist at BNP Paribas SA, said that the front-loading of shipments abroad has been supporting the industrial production of the Asian country in early 2025. The expert also noted that the early roll-out of fiscal stimulus in the current year in China helped accelerate the growth of infrastructure investment.
The financial volume of Chinese exports in the first two months of 2025 was recorded at $535.25 billion mark. This indicator increased by 3.4% year-on-year. The relevant information was published by the General Administration of Customs in the first half of the current month.
At the same time, the prolonged downturn in the Asian country’s property sector continues to be a factor of pressure on the world’s second-largest economy. Tariffs from the United States will strengthen the overall burden.
Jacqueline Rong stated that the real estate sector will remain a drag for the Asian country’s economic system in the current year. The expert also separately noted that the impact of tariffs will become evident sooner or later, and downside risks to external shipments will definitely show up.
For China, increasing consumer spending is a way to counter the tightening of the tariff policy of the United States, which at some point will slow down the Asian country’s exports. It is worth noting that exports accounted for almost a third of the growth of the world’s second-largest economy last year. The tightening of the tariff policy of the United States as an impact factor concerns not only China. Appropriate measures contribute to a kind of turbulence in the entire global trade space.
China has expanded its trade-in program for consumer goods and introduced measures to restore household confidence as part of its efforts to boost domestic spending.
It is worth noting that the latest data reflect the demand for goods that were eligible for subsidies. Retail sales of products ranging from furniture to home appliances showed a sharp increase. Holidaymakers splurged during the week-long Chinese New Year break through early February.
Highlighting the government’s push to sustain the recovery momentum in household spending, Chinese policymakers last weekend unveiled a special action plan aimed at reviving consumption. The guidelines published by the State Council, China’s cabinet, prioritized measures on raising incomes, stabilizing the stock and real estate markets, and offering incentives to raise the Asian country’s birth rate.
In the first two months, the Chinese economy showed results that exceeded expectations. At the same time, Beijing needs to take appropriate incentive measures to maintain the upward dynamic.
Li Chunlin, vice chairman of the National Development and Reform Commission, said at a briefing on Monday that China could further expand its trade-in program after a preliminary review of the effectiveness of existing measures. It was also separately noted that household confidence and demand remain weak in a consumption environment that needs to be improved.
Li Chunlin and other officials on Monday did not provide any additional details of Beijing’s action plan.
Citigroup Inc. expects that there will be a window for policy implementation in China in the next few months, which provides for reducing the amount of cash that banks must keep in reserve next quarter and cutting interest rates in the next three months. Experts from this organization also suggest that China’s leadership will use the mid-year Politburo meeting to assess progress.
Citigroup economists including Xiangrong Yu said in a report released on Monday that all eyes could be on property and consumption support, and Supply-Side Reform 2.0. They also noted that the momentum of growth in the world’s second-largest economy may weaken as external headwinds gather.
This week, President of the People’s Republic of China Xi Jinping, during his inspection in the southwestern province of Guizhou, noted the importance of adhering to high-quality development and driving the upward dynamic of the Asian country’s GDP by further deepening reforms and opening up comprehensively. He also called on the province to build confidence, work hard, and make consistent moves to advance China’s modernization.
