China’s Economy Forecast to Show Resilience as Trade War Begins

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Thu, Mar 13, 2025, 8:00 PM 4 min read

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China’s economy likely showed stability in the first two months of the year, despite US President Donald Trump returning to office and almost instantly starting a second trade war with Beijing.

As policymakers keep stimulus in reserve for tariffs, data due Monday will show retail sales picking up and investment staying steady from last year’s full-year figures, according to forecasts by economists in a Bloomberg survey. Industrial production will only slip slightly, in a period when factories closed for the Lunar New Year break.

Evidence the world’s No. 2 economy is withstanding trade war headwinds comes after President Xi Jinping’s government this month set a record budget deficit target and maintained a bullish annual growth goal of about 5% for 2025. That expansion target faces challenges ahead with Trump already hiking China tariffs twice, threatening the export engine that last year generated almost a third of growth in gross domestic product.

“We expect steady readings for major activity indicators for the first two months this year,” Citigroup Inc. economists including Xiangrong Yu said in a report last week. “We expect a solid start to the year, with trade headwinds yet to materialize.”

The National Bureau of Statistics is set to release January and February economic data on Monday at 10 a.m. local time. Here’s what to expect:

Industrial production is forecast to rise 5.3% compared to 5.8% for the entirety of 2024
Retail sales are expected to climb 3.8% compared to 3.5% for all of last year
Fixed-asset investment is likely to rise 3.2% compared to 3.2% for 2024

Industrial Production

The industrial sector outpaced consumer growth last year as China operated on a two-track growth model, and that trend looks set to continue. Industrial production likely expanded 5.3% in the first two months, according to the median forecast of economists polled by Bloomberg, a drop from 5.8% for all of last year.

Factory activity returned to expansion in official data last month despite the Trump administration kicking off a global trade war, while non-manufacturing activity in construction and services rose in line with forecasts. China’s exports also reached a record in the first two months, with the value of sales hitting $540 billion as firms shipped more goods to the ASEAN bloc and European Union.

Xi has been trying to buoy the private sector this year, recently hosting a meeting with tech bosses including once-shunned Alibaba Group Holding Ltd. co-founder Jack Ma, in a bid to restore confidence.

Consumption

Invigorating the consumer has been a challenge for the government since the Covid Zero controls lifted, and early data indicates those challenges continue. Retail sales rose 3.8% in the past two months, according to the survey, a slight increase from a full year figure of 3.5% last year but down compared with 5.5% growth a year ago.

What Bloomberg Economics Says...

“Consumer spending was the weakest area, with retail sales slowing despite a lift from holiday-related demand over the Lunar New Year. Going forward, stimulus announced at the National People’s Congress in March should support the recovery, but the 5% growth target for 2025 still looks challenging.”

— Chang Shu and David Qu

Read the full note here.

China’s inflation turned negative in the January to February period for the first time since 2021. While an earlier-than-usual national holiday helped push price growth below zero, the downswing was sharper than predicted. Imports unexpectedly fell 8.4% at the beginning of the year, too, indicating weak demand.

During China’s annual parliamentary huddle this month, top leaders made boosting consumption the work report’s top priority for the first time since Xi came to power over a decade ago. But analysts have been skeptical about whether actions such as doubling state support for the flagship trade-in program to 300 billion yuan ($41.4 billion) is enough to turn things around.

Fixed-Asset Investment

The collapse in the housing market over recent years has dragged down activity, and remains one of the biggest pain points in China’s economy. The crisis has contributed to deflationary pressures, as it hits home prices where Chinese consumers store the vast majority of their wealth.

Still, government measures to shore up the sector have led to some stabilization. In an encouraging sign, the decline in new-home prices eased for a fifth month in January, as policymakers step up efforts to end the property slump.

That trend looks likely to continue, with fixed-asset investment gaining 3.2% in the first two months, according to forecasts, holding steady with last year’s full year reading.

--With assistance from Yujing Liu.

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China’s Economy Forecast to Show Resilience as Trade War Begins

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