China’s economic growth likely slowed in the second quarter of 2025 as trade tensions and the prolonged property downturn weighed on demand, intensifying pressure on policymakers to step up stimulus efforts. According to a Reuters poll, China’s GDP is expected to have grown 5.1% year-on-year between April and June, down from 5.4% in Q1. While still in line with the official annual growth target of around 5%, the projected slowdown signals rising headwinds for the world’s second-largest economy.
Despite avoiding a sharp downturn so far, thanks to a fragile U.S.-China tariff truce and prior stimulus measures, concerns are mounting about a weaker second half. Morgan Stanley analysts warn that growth could drop to 4.5% or lower in Q3 due to declining exports, deflationary pressures, and the impact of U.S. tariffs. A supplementary fiscal package worth 0.5–1 trillion yuan ($70–140 billion) is anticipated by late Q3 to support growth.
June trade data showed a brief recovery in exports and imports as manufacturers raced to benefit from the current truce before new tariffs take effect in August. However, industrial output and retail sales are expected to show signs of cooling. On a quarterly basis, Q2 GDP is projected to have grown 0.9%, slowing from 1.2% in Q1.
Looking ahead, China’s GDP growth is forecast to ease to 4.6% in 2025 and further to 4.2% in 2026. Markets are now eyeing the upcoming July Politburo meeting for possible stimulus announcements. Analysts expect minor rate cuts later this year, including to the seven-day reverse repo and the loan prime rate. However, experts caution that monetary easing alone may not curb deflation, prompting calls for deeper supply-side reforms to stabilize growth and jobs.