China’s economy grew by 5.2% in the second quarter of 2025, slightly above analysts’ expectations, as strong exports and manufacturing activity helped offset continued weakness in domestic demand.

The figure, released by the National Bureau of Statistics on Tuesday, beat the 5.1% median forecast in a Reuters poll and keeps China broadly on track to meet its full-year growth target of around 5%. The performance comes despite heightened trade tensions with the United States, where President Donald Trump has threatened further tariffs on Chinese goods.

Analysts say part of the second-quarter strength can be attributed to frontloaded trade activity ahead of the potential imposition of new US tariffs. The data also reflect increased fiscal spending by Beijing in the first half of the year. Shuang Ding, chief economist for Greater China and North Asia at Standard Chartered, said the second half could bring more headwinds, with higher tariffs expected to weigh on export performance.

China’s National Bureau of Statistics reported that industrial output grew by 6.8% in June compared to the same period last year. This exceeded the average forecast of 5.7% and marked a solid contribution to GDP growth. The manufacturing and high-tech sectors showed particular strength, with notable gains in robotics, new energy vehicles, and equipment manufacturing.

Retail sales rose by 4.8% year on year in June, falling short of the 5.4% average estimate and slowing from a 6.5% increase in May. Economists noted that recent government policies, including a trade-in programme aimed at encouraging consumer purchases through subsidies, may have already reached their peak impact.

Lynn Song, chief China economist at ING, said the stimulus effect from the policy could now be levelling off. While domestic consumption remains a concern, exports and fixed investment continued to play a leading role in supporting growth.

Property sector weakness remains a key drag on the economy. Average new home prices fell by 3.7% in June compared to the same month last year. Prices for second-hand homes dropped by approximately 6%. Sheng Laiyun, deputy commissioner of the National Bureau of Statistics, described the slowdown as a “normal phenomenon” reflecting a broader bottoming out of the real estate market.

On the trade front, China posted strong second-quarter figures following a temporary truce in the trade war last month. The pause allowed exporters to ramp up shipments before any new restrictions take effect. However, Washington is now targeting the rerouting of Chinese goods through third countries, including Vietnam, to circumvent tariffs. New measures may increase pressure on Chinese export volumes in the second half of the year.

Financial markets reacted cautiously to the data. The CSI 300 index, which tracks major stocks in Shanghai and Shenzhen, declined by 0.5% on Tuesday. The renminbi weakened slightly to Rmb7.18 per dollar. In Hong Kong, the Hang Seng index edged up by 0.2%.

Despite mixed signals from different sectors, China remains on track to meet its annual growth goal. The administration of President Xi Jinping has relied heavily on exports and industrial output to maintain momentum amid a prolonged downturn in property and subdued domestic demand.

Economists caution that while the headline growth rate is encouraging, risks remain. Industrial overcapacity, particularly in some manufacturing sectors, has led to deflationary pressures and increased competition in the domestic market. Recent commentary in state media has criticised price wars caused by overproduction.

Eswar Prasad, professor of economics at Cornell University, said further stimulus and structural reforms may be required in the second half of the year to support growth and address imbalances in the economy.

China’s government is expected to continue monitoring both domestic conditions and developments in the trade relationship with the United States, as officials prepare for renewed talks in an effort to avoid further tariff escalation.