China Stats Bureau Spokesperson: China still has broad space to expand consumption growth

China Stats Bureau Spokesperson: China still has broad space to expand consumption growth

China's economy has shown resilience in the first half of 2025, with GDP growth outpacing the government's annual target. According to a Bloomberg survey, the second quarter saw GDP rise by 5.1% year-on-year, pushing first-half growth to 5.3% [1]. This performance has been bolstered by strong exports and fiscal support, which have helped mitigate the impact of ongoing trade tensions with the U.S. Despite this, the People's Bank of China has indicated a more cautious stance on monetary policy, signaling a wait-and-see approach to further stimulus.

Consumption growth in China has been a key focus for policymakers. Retail sales growth slowed to 5.2% in June year-on-year, but this is still a significant figure that contributes to overall economic expansion. The government has been proactive in supporting consumer spending, allocating 300 billion yuan from ultra-long special sovereign bonds to fund subsidies this year [1]. However, some economists have urged additional consumer-focused support to cushion the potential impact of higher U.S. tariffs on Chinese goods in the coming months.

The Chinese government has also been addressing industrial overcapacity and deflationary pressures. Industrial production rose 5.6% in June, but profits at industrial firms fell 1.1% in the first five months despite rising output. The government has vowed to curb "involution" and tackle overcapacity, signaling a renewed focus on ending years-long price wars dragging on growth [1].

Investment in fixed-asset projects rose 3.6% year-on-year in the first half of 2025, with the property market contraction continuing. The government has been front-loading fiscal aid to give the economy an early boost and has room for further policy action to support growth. Economists expect a 10-basis-point cut to the policy rate and a 50-basis-point reduction in banks' reserve requirement ratios by year-end [1].

Despite the first-half performance, there are concerns about a potential "demand cliff" in the second half of the year. Factors such as the reining in of industrial overcapacity, weaker export momentum, and continued real estate troubles could pose challenges to growth. Beijing needs to take bolder actions to clean up the property sector, support consumption sustainably, and address fiscal and macroeconomic issues to maintain economic stability [1].

References:
[1] https://www.bloomberg.com/news/articles/2025-07-13/china-s-growth-seen-outpacing-target-easing-stimulus-pressure