In the initial two months of 2025, the economic performance in China was uneven, both resilient and evidencing emerging challenges. NBS statistics indicated that industrial production rose 5.9% year-on-year in January and February, down from December’s growth of 6.2%. This deceleration is a sign that while industrial activity is robust, it is being challenged, perhaps by the external world in the form of higher U.S. trade tariffs.
Retail sales, a strong proxy for domestic consumption, rose 4.0% in the same month after a 3.7% gain in December. This is the fastest growth rate since November 2024 and reflects well on the success of government efforts to encourage consumer spending. The Lunar New Year festival would have helped here with celebratory spending bringing a short-term jump in volumes of retailing.
In the first two months, fixed asset investment, including infrastructure and real estate, was up 4.1% year-over-year, higher than the analysts’ predictions of a 3.6% increase. While the future investment opportunities are clouded by the ongoing concerns surrounding the medium-term slowdown in the property sector, this growth stands as a signal for continued investment going into the very core sectors.
But not all the signs were positive. The urban unemployment rate rose to 5.4% in February, its two-year peak, reflecting underlying vulnerabilities in the labor market. This rise in unemployment may impact domestic consumption and consumer confidence in the coming months.
As an answer to such contradictory signals, Chinese officials placed top priority on boosting domestic demand to offset foreign pressures, most notably those originating from increasing American trade tariffs. The State Council initiated a “special action plan” to push consumption. besides other plans that aim to hike residents’ incomes and establish schemes for childcare subsidies. These are meant to advance family consumption and reduce the nation’s reliance on the outside world.
Despite all these efforts, the economy has grave problems. The additional 20% tariffs ordered by the Trump administration on all Chinese imports threaten to further disrupt trade patterns, leading to reduced revenue from exports and additional stress on local enterprises. Furthermore, the persistent property crisis still looms large over economic stability, as property investment declined 9.8% and new building commencements down 30% during the first few months of 2025.
Experts caution that achieving the government’s target of around 5% economic growth in 2025 may be challenging in the prevailing situation. The interaction of external trade tensions, a slow property market, and rising unemployment may drain economic momentum. To counter these risks, sustained policy support and institutional reforms may be required to drive more vibrant and consumption-driven growth.
Briefly speaking, China’s first 2025 economic data are mixed colors. While there is some positive news in retail sales and investment, slowing industrial output growth, rising joblessness, and external trade pressure still exist. The government’s resolute measures to support domestic consumption and investment will help to combat such headwinds as well as sustain economic growth despite the clouds of uncertainties globally.
