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    Home»Property»China’s economy beats the gloom. Can it do more?
    Property

    China’s economy beats the gloom. Can it do more?

    July 1, 20253 Mins Read


    Despite trade disruptions, sluggish domestic consumption, a lingering property sector crisis and threat of deflation, the Chinese economy has managed reasonable growth. Mint examines the sustainability of this growth and measures China can take to emerge unscathed.

    How is the Chinese economy doing?

    Despite the disruptions to trade, caused by a trade war with the US that briefly saw Washington impose tariffs running into an unbelievable three digits, China’s merchandise exports remained robust. In the first five months of 2025, they have risen by 6%. This, notwithstanding a 35% fall in exports in May to the US—its biggest market. Domestic demand is good, too. Retail sales in the first four months of 2025 grew by 4.8%, a good 1.5 percentage point better than the same period last year. The Purchasing Managers Index for May, released on Monday, showed a marginal improvement in manufacturing activity.

    How did China manage this show?

    It increased exports by focusing on non-US markets. Exports to India, Brazil, East Asia and Europe rose sharply. The Chinese government has also announced fiscal and monetary stimulus amounting to 1.6% of its GDP in a bid to catalyse domestic demand. This includes subsidies for trading in consumer goods and cuts in the cost of housing loans. Consumption of household appliances and furniture posted double-digit growth in the first four months of this year. Public spending has also increased. This caused infrastructure investments to rise 11.6% in the January-April period compared with 10% last year.

    Has China’s growth outlook been revised?

    Citigroup has raised China’s growth estimate for 2025 to 5% from earlier 4.2%. According to the World Bank, China posted 5% growth in 2024. In the first quarter of 2025, its economy grew by 5.4%. That was before the new trade war. The World Bank projects a 4.5% growth for 2025. An upward revision can happen if China’s economic show sustains.

    What are the risk factors?

    There are many. Though the US and China have struck a trade deal, it remains fragile. Many countries are raising their defence against cheap Chinese goods. This could hurt exports. The revival in domestic demand is not broad-based, reflecting weak consumer confidence. Experts attribute this to slower income growth and uncertain job prospects. The property sector crisis looks sticky as home prices continue to decline. Deflationary pressures remain. The economy, experts say, needs more stimulus.

    What can Beijing do to improve things?

    Apart from a stimulus, economists have called for reforms to address slowing productivity, high debt and an ageing population that are pulling down economic growth. With little healthcare protection and a frayed social safety net, the Chinese hold back on spending when uncertainty increases. For a sustained improvement in household spending, there is a need to direct fiscal resources to improve medical cover and safety net. The property crisis needs a lasting solution as declining home prices hurt consumer sentiment.



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