China’s economic growth is expected to decelerate in the second quarter of 2025 due to ongoing trade tensions and a prolonged property market slump. These factors are dampening domestic demand and increasing pressure on policymakers to introduce additional stimulus measures to sustain growth.

Thus far, the world's second-largest economy has managed to avoid a sharp downturn, partly due to fragile trade ceasefires with the United States and ongoing policy support. However, markets are preparing for a weaker second half as exports lose steam, prices continue to fall, and consumer confidence remains subdued.

According to Investing.com, Tuesday, July 15, 2025, upcoming data is projected to show that China’s Gross Domestic Product (GDP) in Q2 2025 grew by only 5.1% year-on-year, slowing from 5.4% in Q1, based on a Reuters poll.

This projected growth still exceeds the 4.7% forecast in an earlier Reuters poll from April and remains largely in line with the government’s full-year growth target of around 5.0%.

In a note, analysts at Morgan Stanley stated that despite resilient performance so far this year, they foresee slower growth in the second half, citing inflated export returns, a persistent negative deflationary feedback loop, the impact of U.S. tariffs on direct exports, and trends in global trade.

They anticipate that China's GDP growth in Q3 could dip to 4.5% or even lower. The fourth quarter may also be weighed down by an unfavorable base effect, potentially jeopardizing the annual growth target.

The firm expects Beijing to roll out an additional fiscal package of between 500 billion and 1 trillion yuan (approximately USD 69.7 billion to USD 139.5 billion), beginning in late Q3.

Rebound in Exports

On the brighter side, Chinese exports regained momentum in June, while imports also rose as factories rushed shipments ahead of the looming August deadline, aiming to take advantage of the fragile truce on tariffs between Beijing and Washington.

GDP data is scheduled for release on Tuesday at 02:00 GMT. Separate figures on June activity are expected to show a slowdown in both industrial output and retail sales.

Quarter-on-quarter, the economy is forecast to expand by 0.9% in Q2, down from 1.2% in the first quarter (January–March), according to the same poll.

For the full year 2025, China’s economic growth is predicted to cool to 4.6%, below last year’s official target of 5.0%, and is expected to drop further to 4.2% in 2026.

To counter these challenges, Beijing has ramped up infrastructure spending, offered consumer subsidies, and implemented steady monetary easing. In May, the central bank cut interest rates and injected liquidity into the system, as part of broader efforts to shield the economy from U.S. tariffs under President Donald Trump.

However, Chinese analysts and observers caution that stimulus alone may not be sufficient to overcome entrenched deflationary pressures, especially as producer prices in June fell at their fastest rate in nearly two years.

There is growing hope that China will accelerate supply-side reforms to address industrial overcapacity and explore new ways to boost domestic demand.

Analysts note that this task is especially difficult, as Chinese leaders must carefully balance production cuts with labor market stability amid a worsening employment outlook.