China's economy posted stronger-than-expected growth in the first half of 2025, fueled by resilient industrial output and robust exports. But experts warn that headwinds loom, and call for a bold fiscal push in the second half to maintain momentum.
A recent report by the China Finance 40 Forum (CF40) highlights key trends:
- Industrial production: Value-added output rose faster than GDP growth in H1.
- Export growth: Averaged 6.2% in Q2, up from 5.1% in Q1, as firms adapted to U.S. tariff pressures.
- Retail sales: Accelerated growth, helped by government-backed trade-in programs.
To sustain domestic demand, CF40 non-resident senior fellow Zhang Bin laid out four policy recommendations:
- Boost fiscal spending: Issue an extra ¥2.3 trillion in government bonds to meet budget growth targets.
- Invest in urban renewal: Funnel funds into city upgrade projects to offset slowing manufacturing investment.
- Cut interest rates: Lower policy rates further to reduce borrowing costs for businesses and consumers.
- Stabilize the property sector: Ease home-buying restrictions and accelerate developer debt restructuring.
Analysts note that government debt issuance in January-May surged to ¥6.3 trillion, compared to ¥2.5 trillion in the same period last year, while planned issuance capacity for the rest of 2025 stands at ¥7.6 trillion, below 2024 levels.
With uncertainties around U.S. tariffs and fiscal constraints, a well-timed stimulus could shore up consumption, support infrastructure, and keep the housing market stable—charting a course for continued growth in the second half of 2025.
Reference(s):
Experts call for stronger fiscal stimulus to sustain China's growth
cgtn.com
