China's economy beats the gloom. Can it do more?

Copyright © HT Digital Streams Limit all rights reserved. N Madhavan 2 min Read 02 Jul 2025, 05:30 am, despite the disruption of trade, caused by a trade war with the US, which briefly saw Washington imposed rates, exported three figures in the incredible three digits. (AFP) Summary Despite trade interruptions, sluggish domestic consumption, a prolonged crisis in the property sector and the threat of deflation, the Chinese economy has managed reasonable growth. Despite trade interruptions, sluggish domestic consumption, a prolonged crisis in the sector and the threat of deflation, the Chinese economy has managed reasonable growth. Mint examines the sustainability of this growth and measures Chinese who can emerge intact. How about the Chinese economy? Despite the disruptions to trade, caused by a trade war with the US, which briefly saw that Washington imposed rates in an incredible three digits, China’s exports remained strong. In the first five months of 2025, they rose 6%. This, despite a 35% decline in exports in May to the US – the largest market. Domestic demand is also good. Retail sales in the first four months of 2025 grew by 4.8%, a good 1.5 percentage point better than the same period last year. The purchase managers for May, released on Monday, showed a marginal improvement in the manufacturing activity. How did China run this show? This increased exports by focusing on non-American markets. Exports to India, Brazil, East Asia and Europe have risen sharply. The Chinese government also announced fiscal and monetary stimulus of 1.6% of its GDP in an effort to catalyze domestic demand. This includes subsidies for trading consumer goods and cuts in the cost of home loans. The consumption of home appliances and furniture placed double -digit growth in the first four months of this year. Public expenses have also increased. This caused infrastructure investments to rise by 11.6% in the January-April period, compared to 10% last year. Were China’s growth prospects reviewed? Citigroup increased China’s growth raising for 2025 to 5% from earlier 4.2%. According to the World Bank, China achieved 5% growth in 2024. In the first quarter of 2025, the economy grew by 5.4%. This was before the new trade war. The World Bank projects a 4.5% growth for 2025. An upward review could occur if China’s economic performance continues. What are the risk factors? There are many. Although the US and China have entered into a trade agreement, it remains fragile. Many countries increase their defense against cheap Chinese goods. This can damage the exports. The revival in domestic demand is not broadly based, which reflects poor consumer confidence. Experts attribute this to slower revenue growth and uncertain job prospects. The crisis in the real estate sector looks tough as house prices are still falling. Deflationary pressure remains. According to experts, the economy needs more stimulus. What can Beijing do to improve things? Apart from a stimulus, economists have called on reforms to address the slowdown of productivity, high debt and an outdated population that is declining economic growth. With little healthcare protection and a weakened social safety net, the Chinese hold back the spending when uncertainty increases. For a sustained improvement in household spending, there is a need to guide fiscal resources to improve medical cover and safety net. The property crisis needs a lasting solution, as falling house prices do consumer sentiment damage. Catch all the business news, market news, news reports and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More Topics #Primer Read the following story