Reuters, Beijing: China’s economy slowed less than expected in the second quarter in a show of resilience against U.S. tariffs, though analysts warn that weak demand at home and rising global trade risks will ramp up pressure on Beijing to roll out more stimulus.
The world's No. 2 economy has so far avoided a sharp slowdown in part due to policy support and as factories took advantage of a U.S.-China trade truce to front-load shipments, but investors are bracing for a weaker second half as exports lose momentum, prices continue to fall, and consumer confidence remains low.
Policymakers face a daunting task in achieving the annual growth target of around 5% - a goal many analysts view as ambitious given entrenched deflation and weak demand at home.
Data on Tuesday showed China's gross domestic product (GDP) grew 5.2% in the April-June quarter from a year earlier, slowing from 5.4% in the first quarter, but just ahead of analysts' expectations in a Reuters poll for a rise of 5.1%.
"Despite a strong H1, the outlook is set to sour in H2 as export frontloading fades and the impact of U.S. tariffs becomes more visible," Wei Yao, an economist at Societe Generale, said.
"Renewed weakness in house prices and the fading impact of subsidies also cast doubt over the sustainability of the consumption recovery."
Indeed, the solid headline GDP numbers held little sway for most households including 30-year-old doctor Mallory Jiang, in the southern tech hub Shenzhen, who says she and her husband both had pay cuts this year.
"Both our incomes as doctors have decreased, and we still don't dare buy an apartment. We are cutting back on expenses: commuting by public transport, eating at the hospital cafeteria or cooking at home. My life pressure is still actually quite high."
On a quarterly basis, GDP grew 1.1% in April-June, the National Bureau of Statistics data showed, compared with a forecast 0.9% increase and a 1.2% gain in the previous quarter.
Investors are closely watching for signs of fresh stimulus at the upcoming Politburo meeting due in late July, which is likely to shape economic policy for the remainder of the year.
Beijing has ramped up infrastructure spending and consumer subsidies, alongside monetary easing. In May, the central bank cut interest rates and injected liquidity as part of broader efforts to cushion the economy from U.S. President Donald Trump's sweeping tariffs.
Some analysts believe the government could ramp up deficit spending if growth slows sharply.
China's markets wobbled slightly but the overall reaction to the data was largely muted.
