China Q2 GDP Commentary: Stronger Growth Expected in the Second Half

TradingKey - On 15 July 2025, China released its Q2 GDP data, revealing a year-on-year real GDP growth rate of 5.2%, surpassing market expectations of 5.1% and exceeding the annual growth target of 5%. Both demand-side final consumption expenditure and supply-side indicators, such as industrial value-added and the services production index, demonstrated robust performance. 

Looking ahead to the second half of 2025, due to challenges posed by the Trump administration's trade policies, China is expected to gradually intensify its fiscal policy measures. Supported by counter-cyclical policies, real GDP growth in the third and fourth quarters is projected to outpace Q2, enabling the full-year 2025 economic growth to exceed the 5% target.

Main Body

On 15 July 2025, China released its Q2 GDP data, reporting a quarter-on-quarter real GDP growth rate of 1.1%, surpassing market expectations of 0.9%. This contributed to a year-on-year growth rate of 5.2%, exceeding market forecasts by 0.1 percentage points (Figure 1). Relative to the annual target, Q2 growth outperformed the 5% economic growth goal for 2025 (Figure 2).

Figure 1: Market Consensus Forecasts vs. Actual Data

Source: Refinitiv, TradingKey

Figure 2: China Real GDP (%)

Source: Refinitiv, TradingKey

From a demand and supply perspective, China's Q2 2025 data reflects good performance across both dimensions. On the demand side, final consumption expenditure, gross capital formation, and net exports of goods and services contributed 52.3%, 24.7%, and 23% to economic growth, respectively (Figure 3). Notably, consumption growth continues to exhibit strong momentum. Looking ahead, sustained implementation of trade-in policies is expected to accelerate retail sales growth, bolstering overall consumption in the coming quarters.

Figure 3: Contribution to GDP Growth (% of total)

Source: Refinitiv, TradingKey

On the supply side, Q2 2025 data shows significant growth in both industrial value-added and the services production index. Notably, industrial value-added recorded a strong increase of 6.8%. This performance is driven by two key factors: first, the ongoing rush-to-export effect amid U.S. tariff policies; second, the continued impact of the "dual new" (new energy and new technology) policies, further amplified by heightened production in related industries during the 618 shopping festival.

Looking ahead to the second half of 2025, China is expected to gradually intensify its fiscal policy measures in response to the challenges posed by the Trump administration's trade policies. Supported by counter-cyclical policies, real GDP growth in the third and fourth quarters is projected to surpass Q2 levels. This momentum is anticipated to drive China's full-year 2025 economic growth above the 5% target.