China’s GDP Growth Expected to Slow to 5.1% in Q2

China’s robust first-quarter growth set the stage to meet its annual GDP target. However, forecasts indicate a slowdown due to property market troubles and escalating trade tensions.

A Nikkei survey involving 30 local experts projects 5.1% year-on-year GDP growth for April to June, following a 5.3% rise in the first quarter.

The quarter-on-quarter growth rate is expected to drop to 0.8% from 1.6%.

Economist Matthew Roger of Legal & General Investment Management described China’s outlook as “stable-to-downward.”

He cited the government’s reluctance to implement necessary reforms and stimulus measures, especially in the troubled property sector.

The survey precedes the Chinese Communist Party‘s Central Committee meeting on July 15, coinciding with the release of second-quarter GDP figures.

This meeting is crucial for setting economic policies, but analysts anticipate minimal changes.

Despite these challenges, 20 of 26 economists upgraded their full-year forecasts in April, driven by strong first-quarter investment and exports.

The average full-year GDP forecast rose by 0.2 points to 4.9%, nearing the government’s target of around 5%.

Jeremy Zook of Fitch Ratings increased his forecast to 4.8%, attributing this to resilient external demand. However, domestic demand remains weak, exacerbated by the struggling property sector.

China’s Economic Challenges

China’s growth relies heavily on manufacturing and exports, while consumption and real estate lag.

Economist Larry Hu of Macquarie warned that rising trade protectionism and a potential U.S. slowdown could undermine growth.

The European Union’s potential tariffs of up to 38% on Chinese electric vehicle exports add complexity.

Economist Wei Yao of Societe Generale noted that these tariffs highlight the unsustainability of China’s supply-focused growth model.

The survey highlighted market sentiment concerns, with 13 of 22 respondents identifying the sluggish housing market as the top economic risk, followed by weak consumer confidence.

Economist Tetsuji Sano emphasized the lack of demand, noting the authorities’ reluctance to boost household income.

Long-term growth forecasts show a modest outlook, with GDP growth expected at 4.5% in 2025 and 4.3% in 2026.

Economist Gary Ng stressed the need for stronger policies to revive the economy amid demographic challenges and weak consumer confidence.