Executive Summary

China’s economy expanded 5.2% year-on-year in Q2 2025, meeting expectations but decelerating from Q1’s 5.4% growth, according to National Bureau of Statistics (NBS) data released July 15. The first-half GDP growth of 5.3% keeps China on track for annual targets, yet underlying challenges persist with weakening domestic demand, property sector decline, and consumer caution offsetting manufacturing strength and export resilience.

GDP Growth: Steady but Slowing Momentum

China’s Q2 performance reflected an economy maintaining stability while confronting structural headwinds. The 5.2% year-on-year expansion, though meeting forecasts, marked a notable deceleration from Q1’s 5.4% rate. Quarter-on-quarter growth of 1.1% slightly exceeded expectations but fell short of Q1’s 1.2% sequential expansion.

Sectoral performance revealed divergent trends across the economy. The secondary industry (manufacturing and construction) led with 6.4% growth, while the tertiary sector (services) expanded 5.5% and primary industry (agriculture) grew 3.7%. This pattern highlighted manufacturing’s continued strength versus consumption sector challenges.

Industrial Strength vs. Consumption Weakness

Manufacturing Momentum

Industrial production accelerated throughout Q2, reaching 6.8% year-on-year growth in June—the quarter’s fastest pace. Manufacturing value-added increased 7.0% in H1 2025, with high-tech manufacturing surging 9.5%, demonstrating China’s continued competitiveness in advanced sectors.

Retail Sales Falter

Consumer spending showed concerning weakness, with retail sales growth decelerating to 4.8% year-on-year in June from May’s 6.4% peak—a more than one-year high. The May improvement was largely attributed to government trade-in initiatives, but funding shortages in key regions limited the program’s sustainability.

Property Sector: Deepening Downturn

Real estate development investment plunged 11.2% year-on-year in H1 2025, accelerating from the 10.7% decline in the first five months and marking the steepest drop since early 2020’s COVID lockdowns. The 70-city home price data showed broad-based month-on-month declines across all city tiers, indicating systemic market weakness.

Employment Stability Provides Foundation

Labor market conditions remained relatively stable, offering crucial support for social stability. The urban surveyed unemployment rate averaged 5.2% in H1 2025, improving 0.1 percentage point year-on-year, with June’s rate at 5.0%. Youth unemployment (16-24) stood at 5.1% for local hukou holders and 4.8% for non-local registration.

Trade Resilience Supports Growth

External trade demonstrated notable strength amid domestic challenges. Total trade grew 2.1% year-on-year to 21.79 trillion yuan in H1 2025, with exports surging 7.2% while imports declined 2.7%. June exports accelerated to 5.8% year-on-year, exceeding the 4.2% economist forecast.

Policy Outlook and Economic Challenges

Economic headwinds have intensified calls for additional policy support. Morgan Stanley economists expect 500 billion to 1 trillion yuan in new stimulus between September and October 2025, while Nomura analysts predict Beijing will roll out fresh measures as growth challenges mount.

Conclusion

China’s Q2 2025 economic performance demonstrated resilience amid significant challenges, with 5.2% GDP growth maintaining progress toward annual targets. However, the divergent sectoral performance—manufacturing strength versus consumption weakness—highlighted persistent structural imbalances requiring sustained policy attention.

Key Economic Indicators – H1 2025

Indicator	H1 2025 Performance	Year-on-Year Change
GDP Growth	66.05 trillion yuan	+5.3%
Industrial Output (June)	–	+6.8%
Retail Sales (June)	–	+4.8%
Fixed Asset Investment	24.87 trillion yuan	+2.8%
Real Estate Investment	–	-11.2%
Exports	13.06 trillion yuan	+7.2%
Imports	8.79 trillion yuan	-2.7%
Urban Unemployment (June)	–	5.0%
CPI	–	-0.1%
PPI	–	-2.8%

References

• National Bureau of Statistics of China. (2025, July 15). National Economy Made Steady Improvement Despite Challenges in the First Half Year.
• Caixin, Na, Q. (2025, July 15). Update: China’s GDP Growth Slows to 5.2% as Domestic Demand, Property Continue to Weigh. Caixin Global.