The Chinese economy is currently navigating a complex landscape as it seeks to stabilize amidst ongoing challenges in the housing market and broader economic sectors. Despite these hurdles, there are indications of potential growth, supported by fiscal measures and government initiatives. The housing market, a crucial component of China's economy, has yet to find its bottom as property investments continue to underperform. Meanwhile, fiscal stimulus efforts have been front-loaded over the first two months of 2025, aiming to bolster economic activities.
In February, aggregate total social financing (TSF) growth recorded an increase of 8.2% year-on-year, driven by record-high government bond issuance. This development is indicative of the government's concerted efforts to inject liquidity into the economy. January and February activity data largely surpassed market expectations, with the notable exception of property investment, which remained subdued.
The GDP growth forecast for 2025 has been maintained at 4.5%, reflecting cautious optimism. However, there is an upside risk to this forecast, attributed to better-than-expected macroeconomic data. The potential for further stimulus remains on the table, contingent upon the emergence of a significant economic downturn.
Medium- and long-term loans to households and corporates have shown lackluster performance during the initial months of 2025. This tepid loan activity aligns with the ongoing subdued housing purchases and private investment. Nonetheless, infrastructure and manufacturing fixed asset investment (FAI) data have provided support to industrial demand, indicating pockets of resilience within the economy.
The Chinese government's unwavering commitment to supporting growth has particularly benefited consumption, with retail sales receiving a boost from seasonal holiday demand. This strategic focus on consumption is part of broader efforts to stimulate economic activity amid external and internal pressures. However, China continues to face challenges in achieving its ambitious 5% growth target for the year.
As global attention shifts towards upcoming economic indicators, the focus is now on the US Retail Sales data ahead of key Bank of England (BoE) and Federal Reserve (Fed) events. Meanwhile, the Euro maintains a defensive stance as markets anticipate Tuesday's German parliamentary vote on fiscal reforms and US-Russia diplomatic discussions.