China’s economy grows at a robust pace as trade truce eases pressure from U.S. tariffs

A woman takes a selfie with gods of fortune displayed outside a store selling prosperity items at a shopping mall, in Beijing, Monday, July 14, 2025. (AP Photo/Andy Wong)

BANGKOK — China’s economy slowed slightly in the last quarter as U.S. President Donald Trump’s trade war escalated, but it still expanded at a robust 5.2 per cent pace, the government said Tuesday.

That compares with 5.4% annual growth in January-March. The government said Tuesday that in quarterly terms, the world’s second largest economy expanded by 1.1%.

In the first half of the year, the Chinese economy grew at a 5.3% annual pace, the official data show. However, some analysts said actual growth may have been significantly slower.

Zichun Huang of Capital Economics noted that investments in fixed assets such as factory equipment rose only 2.8% in the first half of the year, implying 2.9% annual growth in May and a mere 0.5% increase in June. The 5.2% growth rate overstates the pace of expansion by about 1.5 percentage points, she said.

Capital Economics’ activity proxy shows growth in China’s gross domestic product, or GDP, at less than 4% year-on-year in April and May, Huang said, forecasting annual growth of 3.5% for full-year 2025.

“The economic outlook for the rest of the year remains challenging,” Huang wrote in a report. She added though that “political pressure to meet annual growth targets, even if only on paper, means that published GDP growth will be much higher.”

A key factor behind the latest upbeat data was strong exports. On Monday, China reported that its exports accelerated in June, rising 5.8% from a year earlier, up from a 4.8% increase in May.

Production of high-tech products, vehicles and electrical machinery and equipment rose by about 10% or more from a year earlier.

A reprieve on painfully high tariffs on Chinese exports to the United States prompted a rush of orders by companies and consumers as the two sides resumed trade talks. Chinese companies also have expanded exports to and offshore manufacturing in other countries such as Vietnam, helping to offset the impact of higher tariffs imposed by the Trump administration.

“Generally speaking, with the more proactive and effective macro policies taking effect ... the national economy maintained steady growth with good momentum, showcasing strong resilience and vitality,” the report by the National Bureau of Statistics said.

However, a 0.1% decline in consumer prices in the first half of 2025 showed continuing weakness in domestic demand, a long-term challenge for the ruling communist party as the Chinese population declines and ages. Those troubles deepened during and after the COVID-19 pandemic.

Falling property prices and slowing retail sales also are concerns, said Lynne Song of ING Economics.

Price cutting by Chinese manufacturers to help compete in overseas markets is adding to deflationary pressures that ultimately erode their competitiveness, Louise Loo of Oxford Economics said in a report.

Chinese leaders have set a growth target of 5% for this year, in line with last year’s growth. A resumption of U.S. tariffs of up to 245% if Washington and Beijing fail to meet an Aug. 12 deadline for a new trade deal could derail the recovery in exports, a major driver of growth and employment.

___

AP researcher Yu Bing in Beijing contributed.

Elaine Kurtenbach, The Associated Press