logo
China's economy slows as consumers tighten belts, US tariff risks mount

China's economy slows as consumers tighten belts, US tariff risks mount

Khaleej Times15-07-2025
China's economy slowed less than expected in the second quarter in a show of resilience against U.S. tariffs, though analysts warn that weak demand at home and rising global trade risks will ramp up pressure on Beijing to roll out more stimulus.
The world's No. 2 economy has so far avoided a sharp slowdown in part due to policy support and as factories took advantage of a U.S.-China trade truce to front-load shipments, but investors are bracing for a weaker second half as exports lose momentum, prices continue to fall, and consumer confidence remains low.
Policymakers face a daunting task in achieving the annual growth target of around 5% - a goal many analysts view as ambitious given entrenched deflation and weak demand at home.
Data on Tuesday showed China's gross domestic product (GDP) grew 5.2% in the April-June quarter from a year earlier, slowing from 5.4% in the first quarter, but just ahead of analysts' expectations in a Reuters poll for a rise of 5.1%.
"Despite a strong H1, the outlook is set to sour in H2 as export frontloading fades and the impact of U.S. tariffs becomes more visible," Wei Yao, an economist at Societe Generale, said.
"Renewed weakness in house prices and the fading impact of subsidies also cast doubt over the sustainability of the consumption recovery."
Indeed, the solid headline GDP numbers held little sway for most households including 30-year-old doctor Mallory Jiang, in the southern tech hub Shenzhen, who says she and her husband both had pay cuts this year.
"Both our incomes as doctors have decreased, and we still don't dare buy an apartment. We are cutting back on expenses: commuting by public transport, eating at the hospital cafeteria or cooking at home. My life pressure is still actually quite high."
On a quarterly basis, GDP grew 1.1% in April-June, the National Bureau of Statistics data showed, compared with a forecast 0.9% increase and a 1.2% gain in the previous quarter.
Investors are closely watching for signs of fresh stimulus at the upcoming Politburo meeting due in late July, which is likely to shape economic policy for the remainder of the year.
Beijing has ramped up infrastructure spending and consumer subsidies, alongside monetary easing. In May, the central bank cut interest rates and injected liquidity as part of broader efforts to cushion the economy from U.S. President Donald Trump's sweeping tariffs.
Some analysts believe the government could ramp up deficit spending if growth slows sharply.
China's markets wobbled slightly but the overall reaction to the data was largely muted.
Households pressured
Separate June activity data also released on Tuesday underlined the pressure on consumers. While industrial output rose 6.8% year-on-year last month - the fastest pace since March, retail sales growth slowed down to 4.8%, from 6.4% in May and hitting the lowest since January-February.
China observers and analysts say stimulus alone may not be enough to tackle entrenched deflationary pressures, with producer prices in June falling at their fastest pace in nearly two years.
Zichun Huang, China economist at Capital Economics, said the GDP data "probably still overstate the strength of growth."
"And with exports set to slow and the tailwind from fiscal support on course to fade, growth is likely to slow further during the second half of this year."
Analysts at ANZ expect the economy to slow in the second half, but raised their 2025 GDP growth forecast to 5.1%, from a previous estimate of 4.2%, noting that deflation remains the "key threat."
Data on Monday showed China's exports regained some momentum in June as factories rushed out shipments to capitalise on the fragile tariff truce between Beijing and Washington ahead of a looming August deadline.
Tariff, property headwinds
The latest Reuters poll projected GDP growth to slow to 4.5% in the third quarter and 4.0% in the fourth, underscoring mounting economic headwinds as Trump's global trade war leaves Beijing with the tough task of getting households to spend more at a time of uncertainty.
China's 2025 GDP growth is forecast to cool to 4.6% - falling short of the official goal - from last year's 5.0% and ease even further to 4.2% in 2026, according to the poll.
The country's property downturn remained a drag on overall growth despite multiple rounds of support measures, with investment in the sector falling sharply in the first six months, while new home prices in June tumbled at the fastest monthly pace in eight months.
China's top leaders pledged to push forward urban village renovation and quicken a new property development model, state media reported Tuesday.
Fixed-asset investment also grew at a slower-than-expected 2.8% pace in the first six months year-on-year, from 3.7% in January-May.
The softer investment outturn reflected the broader economic uncertainty, with China's crude steel output in June falling 9.2% from the year before, as more steelmakers carried out equipment maintenance amid seasonally faltering demand.
"Q3 growth is at risk without stronger fiscal stimulus," said Dan Wang, China director at Eurasia Group in Singapore.
"Both consumers and businesses have turned more cautious, while exporters are increasingly looking overseas for growth."
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Trump announces trade deal with Japan
Trump announces trade deal with Japan

Emirates 24/7

time6 minutes ago

  • Emirates 24/7

Trump announces trade deal with Japan

United States President Donald Trump announced a trade framework with Japan , placing a 15 percent tax on goods imported from that nation. 'We just completed a massive Deal with Japan, perhaps the largest Deal ever made,' Trump wrote on his Truth Social platform, noting that Japan will invest US$550 billion into the United States, which will receive 90 percent of the profits. Trump's announcement is potentially the most significant of his trade deals to be unveiled so far, following preliminary agreements with the Philippines, Indonesia, the United Kingdom, and Vietnam. Follow Emirates 24|7 on Google News.

South Africa's small inflation rise leaves room for rate cuts, analysts say
South Africa's small inflation rise leaves room for rate cuts, analysts say

Zawya

time36 minutes ago

  • Zawya

South Africa's small inflation rise leaves room for rate cuts, analysts say

South Africa's inflation rate edged higher in June, reaching the base of the central bank's target range, but analysts said there was still scope to ease monetary policy. Headline consumer inflation rose to 3.0% year-on-year, up from 2.8% in May and in line with the median forecast of economists polled by Reuters. The South African Reserve Bank has cut its repo rate at four of its last five policy meetings as, since August 2024, inflation has been below the 4.5% level it aims for. That is the centre of the bank's 3%-6% band and the bank, known for its caution, has repeatedly said it would prefer to lower the target. Statistics South Africa said annual inflation for food and non-alcoholic beverages hit a 15-month high in June, a significant contributor to the higher headline rate. Higher costs for rentals and utilities also drove inflation upwards, while fuel prices extended their decline for the fourth straight month. Annabel Bishop, chief economist at Investec, said inflation was likely to rise towards 4% by the end of the year but the real interest rate was very high with the repo rate at 7.25% now. "We expect at least one further 25 basis point cut in the repo rate this year," she said in a research note. The central bank will announce its policy decision on July 31, the day before President Donald Trump's 30% tariff on South African exports to the U.S. is due to come into force. Since the May policy meeting, analysts, business people and trade unions have lowered their inflation forecasts in a survey the central bank factors into its rate decisions. David Omojomolo at Capital Economics said South Africa's struggling economy strengthened the case for policy easing. (Reporting by Kopano Gumbi; Editing by Alexander Winning and Barbara Lewis)

Shaikha Al Nowais meets with Chinese Ambassador to strengthen tourism collaboration and global partnerships for resilient tourism
Shaikha Al Nowais meets with Chinese Ambassador to strengthen tourism collaboration and global partnerships for resilient tourism

Zawya

time36 minutes ago

  • Zawya

Shaikha Al Nowais meets with Chinese Ambassador to strengthen tourism collaboration and global partnerships for resilient tourism

Abu Dhabi - Her Excellency Shaikha Nasser Al Nowais, Secretary-General elect of UN Tourism for the 2026–2029 term, met with His Excellency Zhang Yiming, Ambassador of the People's Republic of China to the UAE, in Abu Dhabi. The meeting focused on advancing collaboration in the tourism sector and explored opportunities to forge partnerships that foster cultural and tourism initiatives supporting knowledge exchange and economic development in tourism and related sectors. Her Excellency Shaikha Al Nowais reaffirmed her commitment to working with global partners, particularly China, to develop strategic projects in sustainable and cultural tourism. She noted that China's dynamic tourism industry is a key driver of tourism and cultural exchange, as well as the growth of global tourism markets. H.E. said: 'We value China's continuing efforts to drive tourism and promote partnerships in this field. We look forward to expanding collaboration in the areas of education, training, and tourism innovation through launching training programmes globally to elevate the preparedness of the tourism workforce, enrich cultural tourism experiences, and support rural community development through sustainable tourism.' During the meeting, both sides discussed several priority areas of mutual interest, including initiatives to empower local communities and opportunities to leverage China's expertise and resources. They also explored ways to enhance tourism mobility across countries and regions through bilateral and multilateral collaboration, aligned with the United Nations' global tourism frameworks. Both parties affirmed the importance of aligning international efforts to strengthen tourism's role as a bridge between people and cultures, and as a catalyst for sustainable development and youth empowerment. They emphasized the need for renewed policies that embrace diversity, foster innovation, and ensure the sustainable use of resources. -Ends- For further information, please contact: Orient Planet Group (OPG) Tel: +971 4 4562888 Email: media@

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store