China’s economy expanded by 5.2% year-on-year in the second quarter of 2025, slightly surpassing analysts’ expectations as exports provided critical support against the backdrop of faltering domestic consumption. The latest data, first reported by the Financial Times, highlights both the resilience and the fragility of the world’s second-largest economy amid mounting geopolitical and structural challenges.
The Q2 figure edged past the 5.1% forecast from a Reuters poll but marked a slowdown from 5.4% growth in the first quarter. Still, it puts Beijing within striking distance of its full-year GDP target of “around 5%,” a key economic goal for President Xi Jinping’s administration.
Exports as a Lifeline
Export performance proved stronger than expected following a temporary easing in the US-China trade conflict, allowing Chinese producers to ramp up shipments abroad. On Monday, China released robust trade figures that supported the GDP announcement, reinforcing the role of external demand in keeping the economy afloat.
“Stronger-than-expected export performance is proving to be a key support to Chinese growth even as momentum slows into the second quarter,” analysts at JPMorgan wrote in a note cited by the Financial Times.
However, analysts warn that export tailwinds may not last. The U.S. is preparing new trade restrictions targeting transshipments — a practice where Chinese goods are rerouted through third countries like Vietnam to avoid direct tariffs. These measures could weigh heavily on China’s export prospects in the second half of the year.
“The biggest challenge in the second half lies in the uncertainty surrounding US trade policy, which could weigh on China’s net export contribution,” said Arindam Chakraborty, an economist at ANZ, in remarks published by the Financial Times. “Nevertheless, policymakers are likely to finetune countercyclical measures to target 5 per cent annual growth in 2025.”
Domestic Weakness and Overcapacity Concerns
While exports continue to deliver, domestic demand remains subdued. The country’s protracted property downturn has eroded consumer confidence, and industrial overcapacity is triggering a price war in key sectors — an issue now openly acknowledged by state media.
Beijing’s long-standing reliance on an export-and-manufacturing-led growth model is showing signs of strain. Despite moderate headline GDP growth, the underlying imbalance between external and internal demand is becoming increasingly difficult to ignore.
Policy Implications
With President Xi facing a delicate balancing act — boosting growth while managing trade tensions with Washington — the next few weeks are critical. According to the Financial Times, negotiations over a final US-China trade deal are reaching their climax, a development that could have major implications for both economies.
In the meantime, economists expect the Chinese government to rely more heavily on targeted stimulus and countercyclical policies to cushion the domestic economy. Whether these efforts will be enough to sustain momentum through 2025 remains uncertain.
Still, for now, the second quarter figures provide a sliver of relief for Beijing — a signal that while domestic challenges persist, China’s global trade engine is far from stalling.
