China’s GDP grew by 5.2% in the second quarter of 2025. This growth exceeded global forecasts despite ongoing trade tensions with the United States. The first quarter saw an even higher growth rate of 5.4%. China appears on track to meet its annual growth target of around 5%. However, many analysts predict a slowdown in the latter half of the year.
China’s Economic Growth in 2025
China’s economy expanded steadily in early 2025. The growth rate surpassed market expectations of 4.5% for the second quarter. Manufacturing and industrial production remained strong. Exports continued to grow, although shipments to the US declined by 26%. This shortfall was offset by increased exports to ASEAN, Africa, and the European Union.
Challenges Facing the Chinese Economy
China’s rapid growth over the past three decades relied heavily on exports and real estate. This created structural imbalances. The real estate market collapsed following the downfall of Evergrande, impacting consumer confidence and domestic demand. Youth unemployment rose above 20%, reflecting the economic strain on younger workers. Deflationary pressures have also emerged, causing prices to fall and reducing incentives for spending and investment.
Impact of Global Trade and US Policies
Global shifts away from globalisation and trade have affected China’s export-driven model. The US continued tariffs and introduced policies like the CHIPS Act to boost domestic semiconductor production and counter China’s technological rise. These measures aimed to reduce reliance on China and encourage diversification through the China+1 strategy.
Comparing China and US Economic Growth
Between 2021 and 2024, the US economy grew faster than China’s in nominal terms. China’s GDP increased from $17.8 trillion to $18.2 trillion, while the US economy rose from $23.6 trillion to $29.1 trillion. China’s GDP was 64% of the US economy in 2024, down from 75% in 2021. Despite this, China’s growth remained resilient amid global uncertainty.
Credibility of China’s Economic Data
China’s official GDP data has often faced skepticism due to limited transparency. However, recent research by economists, including a study published by the US Federal Reserve, suggests that China’s growth figures are not overstated. While challenges remain in fully verifying the data, doubts about its accuracy are gradually diminishing.
Questions for UPSC:
- Critically analyse the impact of trade wars on emerging economies with reference to China and the United States.
- Explain the concept of deflation and its effects on economic growth. How can policymakers address deflationary pressures?
- What are the challenges and opportunities presented by the China+1 strategy in global supply chains? Discuss with suitable examples.
- Underline the role of real estate in economic development and explain the consequences of a real estate market collapse on consumer confidence and unemployment.
