Despite renewed trade tensions with the U.S. under President Donald Trump’s second term, China’s economy has shown signs of stability in the first two months of 2025. Key economic indicators due for release Monday are expected to highlight steady retail sales growth, stable investment, and only a slight dip in industrial production, according to economists surveyed.
The resilience comes even as China braces for additional tariff hikes from the Trump administration. In response, Beijing has held back from deploying large-scale stimulus, opting instead for targeted measures to support economic growth, maintain stability, and sustain its ambitious 5% GDP expansion goal for the year.
The National Bureau of Statistics is set to release comprehensive economic data covering January and February at 10 a.m. local time on Monday. Based on forecasts, the following trends are expected:
- Industrial production is predicted to rise by 5.3%, slightly lower than 2024’s full-year growth of 5.8%.
- Retail sales are expected to grow 3.8%, up from 3.5% last year.
- Fixed-asset investment is forecast to increase 3.2%, matching 2024 levels.
China’s industrial sector, which outperformed consumer-driven growth last year, is projected to continue on a similar path in early 2025. Although factory activity slowed during the Lunar New Year period, production still expanded, reflecting underlying economic strength.
Official data last month showed that China’s manufacturing sector returned to expansion, with non-manufacturing activity in construction and services meeting expectations. Additionally, exports hit a record $540 billion in the first two months, driven by stronger trade ties with ASEAN and the European Union, despite escalating U.S. tariffs.
Since returning to office, Trump has taken an aggressive stance against China, swiftly imposing higher tariffs on Chinese imports. His administration’s policies threaten China’s export-driven economy, which accounted for nearly one-third of its GDP growth in 2024.
However, analysts believe the full impact of these trade barriers has yet to be felt. “We expect steady readings for major activity indicators for the first two months this year,” Citigroup Inc. economists led by Xiangrong Yu wrote in a recent report. “We expect a solid start to the year, with trade headwinds yet to materialize.”
While China has yet to unveil any major countermeasures, the government is likely to deploy a mix of policy tools, including tax breaks and targeted stimulus, to cushion the economy from trade disruptions.
Despite China’s stable industrial sector, consumer spending continues to lag behind. Retail sales grew 3.8% in January and February, a slight improvement from 2024’s 3.5% annual growth rate. However, the figure is significantly lower than the 5.5% increase recorded during the same period in 2024.
“Consumer spending was the weakest area, with retail sales slowing despite a lift from holiday-related demand over the Lunar New Year,” said one economist. “Going forward, stimulus announced at the National People’s Congress in March should support the recovery, but the 5% growth target for 2025 still looks challenging.”
A key issue has been deflation, which returned for the first time since 2021 in early 2025. Prices fell sharply, driven by weak domestic demand and the effects of an earlier-than-usual Lunar New Year holiday. Imports also unexpectedly declined 8.4%, further highlighting sluggish consumer activity.
The Chinese government has made boosting consumer confidence a priority, as reflected in the annual work report delivered at the National People’s Congress this month. However, questions remain over whether recently announced stimulus measures, including a 300 billion yuan ($41.4 billion) trade-in program, will be sufficient to reverse the slowdown.
China’s real estate sector remains a major drag on the economy. The collapse of the housing market in recent years has been a significant factor behind deflationary pressures, as declining home values reduce household wealth and spending power.
Government efforts to stabilize the market have yielded some positive results. New-home price declines eased for the fifth consecutive month in January, signaling that recent interventions may be starting to work. Fixed-asset investment, which includes infrastructure and real estate, is expected to have grown 3.2% in the first two months of the year, matching 2024’s growth rate.
While this suggests a degree of stability, analysts warn that a full recovery is still far off. The government has refrained from large-scale bailouts, opting instead for targeted support to struggling developers and homebuyers. Whether these measures will be enough to revive confidence in the sector remains to be seen.
With trade war pressures mounting, China’s policymakers face a tough balancing act: stimulating domestic demand without triggering financial risks. The government has signaled its intent to support growth through measured policy adjustments rather than an all-out stimulus package.
For now, China’s economy appears to be holding steady, but uncertainties remain. If U.S.-China trade tensions escalate further, Beijing may be forced to roll out stronger measures to shield its economy from external shocks.
As the world watches, China’s ability to navigate these challenges will be crucial—not just for its own growth, but for the broader global economy.
