China’s economy is holding strong, even as Donald Trump reignites his trade war. In his first months back in office, Trump raised tariffs twice, targeting Chinese exports, but so far, the impact has been minimal.
Retail sales are rising, investment levels are steady, and industrial production took only a minor hit due to the Lunar New Year slowdown. Beijing is sticking to its 5% growth target for 2025, despite the pressure.
At 10 a.m. Monday, the National Bureau of Statistics will release data covering January and February. Economists predict a 5.3% rise in industrial production, compared to 5.8% in 2024.
Retail sales are expected to climb 3.8%, up from 3.5% last year. Fixed-asset investment is projected to hold at 3.2%, unchanged from 2024.
Xiangrong Yu and a team of Citigroup economists said in a recent report, “We expect a solid start to the year, with trade headwinds yet to materialize.”
Industrial production keeps running despite tariffs
Factories in China are still producing, and exports have not slowed down. In the first two months of 2025, exports hit $540 billion, with major shipments heading to the ASEAN bloc and the European Union.
Despite Trump’s tariffs, factory activity remains strong, and non-manufacturing sectors like construction and services continue to expand.
The industrial sector is still outpacing consumer growth, following the two-track growth model China relied on last year. Manufacturers are adapting, and the country’s export-driven economy is showing little sign of being knocked off course.
Xi Jinping, focused on restoring private-sector confidence, met with Alibaba’s Jack Ma and other tech leaders to boost investment.
Retail sales rise but consumer confidence struggles
China’s retail sector saw a 3.8% increase in spending in the first two months of the year, slightly higher than 2024’s 3.5% but down from 5.5% a year ago. While the numbers are moving in the right direction, challenges remain.
Inflation turned negative for the first time since 2021, a result of an early national holiday and lower-than-expected demand. Imports dropped 8.4%, pointing to weak consumer activity.
The government is making stimulus efforts a priority, doubling state support for its trade-in program to 300 billion yuan ($41.4 billion).
Real estate remains a drag on China’s economy. The housing market crisis continues to weigh on consumer confidence, as most Chinese citizens keep their wealth in property.
However, the decline in new-home prices has slowed for the fifth straight month, a sign that government measures may be working.
Trump may be open to negotiations despite trade war rhetoric
Trump’s policies target China, but some experts believe he could still strike a deal. Kishore Mahbubani, a veteran Singaporean diplomat, said Trump might be more open to negotiating than Joe Biden ever was.
According to him, if Trump reassures Beijing that the U.S. will not push for Taiwanese independence, negotiations could run more smoothly.
“If Trump can get China to open up its market, accept more American exports, and possibly even invest more in the U.S., then it’s possible to have a win-win trade deal,” Mahbubani said.
David Adelman, former U.S. ambassador to Singapore, also weighed in. He pointed out that the U.S. is the biggest buyer of Chinese goods, and American consumers still have massive purchasing power.
At the same time, China’s consumer market is growing, which presents new opportunities for U.S. companies. The global balance of economic power is shifting.
Singapore Deputy Prime Minister Gan Kim Yong said that by 2030, Asia’s share of global GDP will increase from 50% to 60%.
Southeast Asian nations are caught in the middle of the U.S.-China conflict. Many have benefited from U.S. military protection while keeping strong economic ties with Beijing. But now, both Trump and Xi are pushing them to choose a side.
Despite tensions, analysts believe U.S. and China will recognize that cooperation is necessary. Mahbubani said, “Everyone realizes that the best way to survive is to keep their options open.”
China is not slowing down. Trump’s trade war has not derailed its economy, and Beijing remains focused on growth, exports, and consumer spending.
Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More
