Retail and Industrial Growth Spark Optimism Despite Property Sector Woes
China’s economy started 2025 on a positive note, showing signs of improvement despite persistent challenges in the real estate sector and external trade pressures. Retail sales grew by 4%, and industrial production surged 5.9% in the first two months of the year, according to data released by the National Bureau of Statistics (NBS) on March 18.
While the economic data exceeded market expectations and lifted Asian stock markets, experts caution that a complex external environment, weak domestic demand, and a prolonged real estate downturn continue to threaten sustained recovery.
Retail and Industrial Growth Drive Optimism
Retail Sales Up 4% Despite Consumer Caution
- China’s retail sector grew by 4% year-over-year in January and February 2025.
- The increase indicates gradual improvement in consumer sentiment, though spending remains cautious due to job market uncertainties and sluggish wage growth.
- The Lunar New Year holiday in February contributed to increased spending on travel, dining, and entertainment.
Industrial Production Grows 5.9% as Factories Expand Output
- China’s industrial production expanded by 5.9%, reflecting stronger manufacturing activity and recovering demand.
- Export-driven industries showed resilience despite rising global trade tensions, particularly in electronics, machinery, and new energy sectors.
- The rebound in industrial output supported Chinese stock markets, as investors reacted positively to the data.
Challenges Persist: Real Estate Crisis and Global Trade Tensions
Real Estate Market Remains a Major Drag on Growth
- Real estate investment plummeted by 9.8% in the first two months of 2025, highlighting continued distress in China’s property sector.
- The prolonged crisis has undermined consumer confidence, leading to lower discretionary spending and weaker household wealth perception.
- Although home price declines have slowed, the market has yet to stabilize. Both new and existing home prices continued to fall in January and February, albeit at a slower pace than last year.
Analysts expect property prices to bottom out in 2025 but caution against expecting a rapid rebound.
- ING Bank predicts that real estate prices may stabilize this year but will not recover quickly due to high inventory levels and cautious buyer sentiment.
- “February’s data showed that it would be wise for officials not to take their foot off the pedal in terms of policy support,” said Lynn Song, Chief Greater China Economist at ING.
U.S.-China Trade Tensions Add to Economic Uncertainty
- U.S. President Donald Trump imposed a 20% tariff on Chinese goods, adding pressure to China’s export-driven economy.
- The tariff measures are expected to slow trade volumes, particularly for industries reliant on U.S. markets, such as electronics, machinery, and consumer goods.
- The Chinese yuan weakened slightly in response to trade concerns, but the broader impact of tariffs remains uncertain.
At a press conference, Fu Linghui, spokesperson for the National Bureau of Statistics, acknowledged the risks, stating:
“The external environment has become more complex and grim, domestic effective demand is insufficient, some companies are facing difficulties in production and operation, and the foundation for the continuous recovery of the economy is still unstable.”
China’s Economy?
✔ China’s government is expected to introduce more economic support measures, including:
- Monetary easing to encourage lending and investment.
- Targeted stimulus for key sectors such as manufacturing, infrastructure, and green energy.
- Housing market interventions to stabilize real estate prices and restore consumer confidence.
✔ Policymakers must also navigate global trade tensions, as Trump’s tariffs and shifting supply chains continue to impact China’s long-term growth prospects.
While China’s economy has shown resilience in early 2025, sustained recovery will depend on policy effectiveness, global trade developments, and domestic consumer confidence in the coming months.
