China’s growth momentum remained robust in the first half of 2025, with real GDP expanding by 5.3 percent year-on-year, supported by accommodative macroeconomic policies and strong exports. Nevertheless, the economy faces headwinds including a protracted property sector downturn, subdued confidence, deflationary pressure from weak domestic demand, and heightened uncertainty from shifting global trade policies.  The authorities have increased fiscal stimulus to boost domestic activity, alongside monetary easing to support market liquidity and lower financing costs.

Structural reforms are needed to reinvigorate the shift toward more balanced high-quality growth. The challenge is to find new drivers of growth while addressing the social and environmental legacies of China’s earlier development path. Stronger productivity growth is needed to offset diminishing returns to investment and a declining workforce. The role of the state also needs to continue to evolve, with a new focus on providing a clear, fair, and stable business environment; strengthening the regulatory system and the rule of law to further support the market system; and ensuring equitable access to public services to all.

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