BEIJING, June 13, 2025 ¡ª China¡¯s economy maintained growth momentum in early 2025, with real GDP expanding by 5.4 percent year-on-year in the first quarter. Policy support helped boost consumption and spurred a pickup in home sales in major cities. However, consumption growth remains soft, and the property sector in lower-tier cities continues to struggle. Meanwhile, manufacturing investment and exports¡ªstrong until recently¡ªnow face headwinds from global trade policy uncertainty. In response, the government has implemented accommodative monetary and fiscal policies. The latest outlines additional reforms aimed at raising consumption.
According to the Update released today, growth is projected to moderate to 4.5 percent in 2025 and 4.0 percent in 2026, as global trade restrictions and uncertainty weigh on exports, manufacturing investment, and hiring. Fiscal policy is expected to cushion the slowdown through higher infrastructure spending, subsidies, and social protection benefits. Medium-term growth prospects remain constrained by slower productivity growth, high debt, and an aging population.
¡°Household consumption will be key to sustaining growth amid external and domestic economic challenges,¡± said Mara Warwick, ÐÓ°ÉÂÛ̳ Division Director for China, Mongolia, and Korea. ¡°Beyond short-term stimulus, stronger social safety nets, especially for migrant and temporary workers, would encourage more spending by improving financial security and reducing the need for precautionary saving.¡±
Risks to the country¡¯s growth outlook are broadly balanced but significant. Externally, trade policy uncertainty and weaker global growth pose downside risks. Domestically, prolonged property sector weakness could further dampen investment. A softer labor market due to higher uncertainty and delayed corporate investment could weigh on consumption. On the upside, stronger-than-expected fiscal spending could lift growth above current projections.
The Update also highlights the weakening link between growth and job creation. China¡¯s economy created 21 million net new jobs in the last five years, less than half the number created in the previous five years. While employment growth has slowed in construction and services, industry has added more jobs than in the past, in part due to policy support. Technological change¡ªautomation, AI, and digitalization¡ªis also reshaping labor demand, reducing some low-skilled jobs while expanding opportunities for high-skilled talent. These trends have posed greater challenges for informal, migrant, and temporary workers due to limited job security and social protection.
¡°Navigating ongoing labor market transitions requires both macroeconomic policy support and structural reforms,¡± said Elitza Mileva, ÐÓ°ÉÂÛ̳ Lead Economist for China. ¡°To prepare workers for a technology-driven economy the government could enhance the enabling environment for private sector job creation, make targeted investments in skills development, and strengthen social protection coverage.¡±
