Explained: China's GDP growth data

Indian Express

17-07-2025

China's GDP grew 5.2% in the second quarter (April-June) of 2025, according to official figures released on Tuesday. This means that despite the high tariffs imposed by United States President Donald Trump, the value of the economic output (that is, all goods and services) inside China during the second quarter of 2025 was 5.2% more than the economic output during the same quarter of 2024 (Chart 1).
This is the second consecutive quarter in which China's GDP growth has beaten the expectations of global analysts. In the first quarter (January-March), the Chinese economy grew even faster, at 5.4% on an annualised basis. Market estimates had pegged its second-quarter GDP growth at about 4.5%.
At this rate, China looks set to achieve its annual growth target of 'around 5%'. However, most analysts outside the country still expect China's growth to slow down in the second half of the year.
For three decades, China's economy grew at an explosive pace on the back of a historic manufacturing boom that allowed it to capture an ever increasing share of global exports. Within the country, there was a massive expansion of physical infrastructure. This dependence on exports (on the external front) and real estate (on the domestic front) created structural imbalances.
Over the past several years, many countries have turned away from globalisation and global trade, even as their economies have slowed. As the share of exports in China's GDP has fallen, its growth has been affected. That said, even now exports contribute around 20% of the Chinese GDP.
With China's domestic consumer base still struggling to recover from the economic shock of the Covid-19 disruption, the country's economy was hit by a collapse of its booming real estate market. The downfall of Evergrande, once the world's most valuable real estate company, underlined the scale and consequences of the crisis.
Real estate figured prominently among people's household assets — the crashing prices of property hit consumer confidence further, dampened the overall demand for goods and services, and slowed down China's domestic engines of growth.
A direct fallout was an increase in unemployment. Youth unemployment (ages 16 to 24) rose to more than 20% — one in five — by the middle of 2023, the last time that the government released these data.
The Chinese economy has also been facing deflationary pressures (Chart 2), which refers to prices going down year on year. Deflation, the opposite of inflation, often presents serious problems for an economy. As prices start to fall, consumers hold back purchases in the hope of buying the same good for cheaper later. This behaviour brings down prices further as the gap between supply and demand widens.
A deflationary spiral means there is no incentive for businesses to invest or produce goods, and this results in the economy stagnating. Resolving deflation can be more difficult than containing high inflation because there is only so much that policymakers can do in terms of cutting interest rates and increasing government spending to boost economic activity.
The supply chain disruption caused by the pandemic spotlighted the dangers of high dependence on China and led to efforts by countries to diversify by adopting a China+1 strategy. In the US, the Biden administration continued with the tariffs imposed by the first Trump administration and took other policy initiatives (such as the CHIPS Act) to boost the American semiconductor industry and contain China's advance in critical new technology areas.
Indeed, in the years after the pandemic, the world's largest economy has increased the lead over its nearest competitor. In 2021, China's economy was around 75% the size of the US economy; in 2024, China's GDP was only 64% of the US's.
Between 2021 and 2024, the US economy grew from an annual nominal GDP of $23.6 trillion to $29.1 trillion, China's annual GDP during this same period increased by less — from $17.8 trillion to $18.2 trillion.
Many had expected Trump's tariff war would significantly affect the Chinese economy. But the data since the start of 2025 have been counterintuitive. While the US economy shrank in the first quarter and there are persistent worries about a recession, China has maintained a steady growth momentum.
China's GDP growth rate has moderated from the first quarter, but underlying data show manufacturing growth has remained resilient, and industrial production continues to beat forecasts.
Chinese exports too have continued to grow. Even though exports to the US have reportedly fallen 26%, the gap has been more than filled by a rise in exports to other destinations such as the ASEAN countries, Africa, and the European Union.
There is one other, fundamental question: can data from China's National Bureau of Statistics be trusted?
China's national accounts have never enjoyed credibility of the kind that Western economies with a free press and transparent reporting standards have had. Thus, every time China's data beats expectations, questions are raised on its credibility.
But doubts over China's GDP data are gradually receding. Research by Barcelona et al (Chart 3) published on June 6 on the US Federal Reserve website, concludes: '…Assessing the accuracy of China's GDP growth remains a challenge and no statistical model can provide a definitive alternative measure. But our analysis suggests that official figures have not recently been overstating GDP growth…'