Despite a complex global landscape marked by persistent uncertainties and mounting external pressures, China’s economy has demonstrated remarkable resilience, achieving a steady and robust growth of 5.3 percent year-on-year in the first half of 2025. This impressive performance, confirmed by data released Tuesday by the National Bureau of Statistics (NBS), underscores the nation’s strategic pivot towards strengthening internal drivers and fostering innovation, laying a solid foundation for achieving its annual growth target.

In the second quarter alone, China’s Gross Domestic Product (GDP) expanded by 5.2 percent year-on-year, contributing significantly to the overall half-year figure. Sheng Laiyun, deputy head of the NBS, lauded the results at a press conference, describing the progress as “highly valuable,” characterized by continued advancement and a positive trend built on overall stability. “This is a hard-won achievement, especially given the sharp changes in the international environment and increased external pressures since the second quarter,” Sheng emphasized, highlighting the challenging backdrop against which this growth was secured.

China’s Economic Resilience: A Deeper Look at H1 2025 Performance

The 5.3 percent GDP growth rate for the first half of 2025 positions China comfortably above its around 5 percent full-year growth target, signaling strong momentum. Beyond the headline GDP figure, several key economic indicators showcased better-than-expected performance, painting a picture of an economy making steady progress despite the prevailing pressures.

Industrial output, a crucial gauge of manufacturing activity, saw a notable increase of 6.4 percent compared to the same period last year. This growth was particularly pronounced in the equipment manufacturing and high-tech manufacturing sectors, which demonstrated rapid expansion, indicating a structural upgrade within China’s industrial base.

The consumer market, a vital component of domestic demand, maintained its upward trajectory. Retail sales of consumer goods expanded by 5 percent year-on-year in the first half, accelerating by 0.4 percentage points compared to the first quarter’s growth. This acceleration points to the increasing effectiveness of government measures aimed at stimulating household spending.

Fixed-asset investment, a key driver of economic activity, continued its growth, marking a 2.8 percent year-on-year increase during the first six months. Investment in the manufacturing sector, in particular, saw significant growth, reflecting ongoing efforts to modernize and expand industrial capabilities.

The job market remained generally stable, a critical indicator of social stability and economic health. The surveyed urban unemployment rate averaged 5.2 percent in the first half, a slight but positive decrease of 0.1 percentage points from the first quarter. This stability in employment provides a crucial underpinning for consumer confidence and overall economic well-being.

Furthermore, the country’s per capita disposable income reached 21,840 yuan (approximately USD 3,000) during the January-June period, marking a 5.3 percent year-on-year increase in nominal terms, or 5.4 percent after deducting price factors. This growth in disposable income directly translates into increased purchasing power, further fueling domestic consumption. As noted by iChongqing, Sheng Laiyun highlighted that “one notable feature of the first half is the stability of the economic operation,” with key macroeconomic indicators showing improvement and foreign exchange reserves maintained above USD 3.2 trillion.

Domestic Demand: The Unwavering Pillar of Growth

In response to persistent external challenges and a shifting global economic landscape, China has strategically prioritized boosting domestic demand as a key engine for sustainable growth. This policy emphasis has yielded tangible results in the first half of 2025, with NBS data revealing that domestic demand contributed a substantial 68.8 percent to GDP growth during the period. Final consumption expenditure alone accounted for 52 percent of this growth, solidifying its role as the primary driver of the nation’s economic expansion.

A cornerstone of China’s consumption-boosting strategy is the consumer goods trade-in program. This initiative, which expanded its scope to cover more product categories in the first half of this year, has played a vital role in stimulating retail sales. According to data from the Ministry of Commerce, the trade-in program generated a staggering 1.1 trillion yuan (approximately USD 152 billion) in sales in the first five months of the year. This program incentivizes consumers to replace outdated products with newer, often more energy-efficient and technologically advanced alternatives.

The program’s expansion in 2025 was significant, increasing eligible home appliance categories from eight in 2024 to twelve, now including items like microwaves, water purifiers, dishwashers, and rice cookers. Consumers also received subsidies of up to 500 yuan (approximately USD 69) per item for purchases such as smartphones, and a broader range of passenger vehicles were added to the program. As reported by China Daily, the trade-in initiative proved effective in spurring spending, promoting industrial upgrades, facilitating the green transition, and enhancing living standards. In the first five months of 2025, consumers traded in 77.6 million home appliances, 56 million electronic devices, and 6.5 million electric bikes, with over 57 million home decor items also receiving support.

Beyond stimulating immediate purchases, the trade-in program has significant co-benefits. An analysis by Ember highlighted that the program could accelerate energy efficiency improvement in China’s room air conditioner (RAC) stock by 70 percent compared to recent historical paces, potentially reducing residential cooling electricity consumption by 3.4-4.1 percent during the summer of 2025, saving consumers up to USD 943 million on electricity bills. To ensure the steady and balanced progress of this program, the National Development and Reform Commission (NDRC) and the Ministry of Finance are scheduled to allocate additional funding in July and October, reinforcing the government’s commitment.

Complementing these fiscal measures, China has adopted a moderately loose monetary policy since the beginning of the year. The People’s Bank of China (PBOC), the country’s central bank, has implemented a range of measures to shield the economy from external challenges and support sustained recovery. These include cutting the reserve requirement ratio (RRR), lowering interest rates on structural monetary policy tools, and expanding the quota for relending in support of scientific and technological innovation and transformation. According to CGTN, as of the end of June, China’s total social financing scale reached 430.22 trillion yuan (approximately USD 61.46 trillion), marking an 8.9 percent year-on-year growth. New yuan-denominated loans issued totaled 12.92 trillion yuan in H1 2025, with loans to enterprises increasing significantly and primarily directed towards key areas like manufacturing and infrastructure. The weighted average interest rate of new corporate loans was approximately 3.3 percent, about 45 basis points lower than the same period last year, indicating a downward trend in overall social financing costs.

Experts like Gao Peiyong, former vice-president of the Chinese Academy of Social Sciences, emphasize the growing importance of domestic consumption as the primary driver of economic growth, noting that “Consumption is increasingly becoming a key engine for China’s economic recovery, and there is still significant untapped potential in this area.” To unlock this full potential, China is not only focusing on short-term interventions but also addressing underlying issues of income distribution and wealth accumulation through systemic reforms, aiming for a more stable foundation for long-term consumption growth, as discussed by China Daily.

New Momentum Gathers Pace: The Rise of High-Tech and ‘New Quality Productive Forces’

A defining feature of China’s economic development in the first half of 2025 has been the “accumulation of new growth momentum,” driven by rapid advancements in high-tech sectors and the strategic cultivation of “new quality productive forces.” Sheng Laiyun highlighted that the value-added industrial output in high-tech manufacturing rose by 9.5 percent, a growth rate 3.1 percentage points higher than that of overall industrial output during the same period.

This surge is evident in the output of specific cutting-edge products. According to the Global Times, the output of 3D printing devices jumped by an astonishing 43.1 percent, new energy vehicles (NEVs) by 36.2 percent, and industrial robots by 35.6 percent year-on-year. These figures underscore China’s commitment to moving up the global value chain and dominating strategic emerging industries.

The concept of “new quality productive forces,” first proposed by President Xi Jinping in 2023 and promoted by the 20th Communist Party of China Central Committee in July 2024, is central to this transformation. These are advanced productive forces that aim to improve labor resources and objectives, leading to enhanced total factor productivity. They represent a new development paradigm focused on integrated advancements in technological and industrial innovation, pushing forward new industrialization, and expanding and strengthening advanced manufacturing. The goal is to foster new growth drivers and upgrade traditional industries by leveraging cutting-edge digital technologies such as AI, 5G, and big data.

Regions across China are actively developing new quality productive forces suited to their local conditions, accelerating the integration of technological and industrial innovation. The industrial internet, as a new type of infrastructure, plays a pivotal role in driving this development, advancing new industrialization, and accelerating the digital transformation and upgrading of enterprises. Efforts are being made to promote the innovative application of the industrial internet and fully unlock the value of massive data resources.

To further advance tech-driven growth, a recent executive meeting held by the State Council, China’s cabinet, called for accelerated breakthroughs in core technologies, translating technological achievements into productivity, and consolidating the role of enterprises in pioneering innovation. The Ministry of Industry and Information Technology (MIIT) released a work plan aimed at integrating information technology with China’s industrialization, including launching pilot programs in cities to accelerate the adoption of advanced technologies in manufacturing and supporting the digital transformation of small and medium-sized enterprises (SMEs). This aligns with China’s broader “Digital China” initiative, with a 2025 action plan outlining key initiatives in “AI Plus,” infrastructure upgrades, the data industry, and digital talent development, as reported by english.www.gov.cn. The plan aims for the added value of core digital economy industries to contribute over 10 percent of the country’s GDP by the end of 2025.

Furthermore, China is promoting the digital transformation of its electronic information manufacturing industry, setting a goal for major enterprises to achieve a numerical control rate of over 85 percent in key production processes by 2027. This push towards smart manufacturing and automation is a testament to China’s “Made in China 2.0” strategy, an AI-augmented, green-energy-powered, self-reliance-oriented transformation of its industrial base, as discussed by the World Economic Forum. Wen Bin, chief economist at China Minsheng Bank, noted that China will continue to pursue high-level self-reliance and strength in science and technology, with efforts underway to strengthen policy support for tech-driven development, including the recent launch of a science and technology board for its bond market and a risk-sharing instrument for sci-tech innovation bonds.

Navigating Challenges and Embracing a Positive Outlook

Despite the impressive performance in the first half, China’s economy is not without its challenges. Sheng Laiyun acknowledged that the external environment continues to be complex and unpredictable, while internal structural issues have yet to be fundamentally resolved. These include lingering weak demand in certain sectors, ongoing adjustments in the real estate market, and a relatively low consumption-to-GDP ratio. The OECD Economic Outlook points to a prolonged period of weak investment and elevated uncertainty as factors weighing on potential output growth. The Diplomat also highlighted that while H1 data was encouraging, short-term resilience does not guarantee long-term transformation, with internal pressures like stagnant consumption and falling property prices persisting.

However, the outlook for the second half of the year remains largely positive. Sheng Laiyun affirmed that the Chinese economy has a solid foundation to sustain steady growth, building on the strong groundwork laid in the first half. The combined effectiveness of the country’s more proactive macro policies is expected to continue ensuring the stable functioning of the economy. Relevant authorities are actively speeding up the introduction of policies for the second half of the year, diversifying the policy toolkit, and promising prompt measures in response to market changes.

This positive sentiment is echoed by several global financial institutions. Major investment banks such as Goldman Sachs, Deutsche Bank, and Morgan Stanley have recently raised their forecasts for China’s economic growth rate in 2025. Goldman Sachs, for instance, revised its forecast upward by 0.6 percentage points, while JPMorgan increased its projection by 0.7 points. Morgan Stanley raised its forecast by 0.3 percentage points, citing improving household and public consumption. Nomura’s Chief China Economist, Lu Ting, adjusted the Q2 GDP growth estimate up by 1.1 percentage points and raised the full-year forecast by 0.5 percentage points, attributing it partly to progress in U.S.-China trade talks.

Xiong Yi, chief China economist at Deutsche Bank, emphasized the strong potential for China’s services consumption to expand in the coming years. He noted that China has likely reached a development stage where its population will have increasing demand for higher-quality services, including elderly care, healthcare, education, and tourism. Xiong added that China’s innovative capacity, the competitiveness of its manufacturing supply chain, and improving domestic demand and business sentiment have increasingly attracted international investors.

Looking ahead, China’s strategy for the next phase involves strengthening domestic circulation and countering external uncertainties by pursuing high-quality economic development, thereby ensuring stable and sustained growth. The Deloitte China Economic and Industry Outlook for 2025 highlights that while inadequate demand remains a key feature, appropriately loose monetary policy and fiscal expansion will be undertaken. It also anticipates increased government support for equipment renewal in traditional manufacturing and continued strong investment in high-tech manufacturing. The World Bank’s Economic Update suggests that stronger social safety nets would encourage more spending by improving financial security and reducing the need for precautionary saving.

In conclusion, China’s economic performance in the first half of 2025 stands as a testament to its strategic adaptability and the effectiveness of its policy toolkit. By prioritizing domestic demand, fostering high-tech innovation, and proactively addressing challenges, Beijing is charting a course for sustained and high-quality development, reinforcing its pivotal role in the global economy. The journey ahead will require continued vigilance and reform, but the foundation laid in the first half of the year provides a strong impetus for confidence in China’s economic trajectory.

Ready to take your career to the next level? Join our dynamic courses: ACCA, HESI A2, ATI TEAS 7 , HESI EXIT  , NCLEX – RN and NCLEX – PN, Financial Literacy!🌟 Dive into a world of opportunities and empower yourself for success. Explore more at Serrari Ed and start your exciting journey today! ✨

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

17th July, 2025