China's first data release of 2025 has exceeded expectations, showcasing a resilient industrial sector and promising fixed asset investment (FAI) growth. This positive economic update comes despite challenges such as weak private sector sentiment and ongoing trade tensions. As policymakers implement strategies to bolster consumption and investment, the global market watches closely, especially in anticipation of upcoming US Retail Sales data and central bank decisions.
The first two months of 2025 have shown stronger-than-anticipated economic data from China, with industrial activities maintaining stability. The country's equipment renewal subsidy programme is anticipated to further encourage FAI growth, which has already risen by 4.1% year-on-year. However, concerns persist over the private sector's weak sentiment, which continues to weigh on overall growth prospects. Meanwhile, gold prices have maintained their gains below $3,000 in the European session on Monday, driven by mounting trade tensions that underscore demand for safe-haven assets.
Resilient Industrial Activity and Investment Growth
Industrial activity in China has demonstrated resilience in the early months of 2025, providing a solid foundation for the country's economic performance. Despite challenges such as global trade tensions and domestic uncertainties, industrial sectors have held up well, supporting broader economic stability.
The Chinese government has rolled out an equipment renewal subsidy programme aimed at boosting fixed asset investment (FAI). This initiative is expected to further stimulate FAI growth, which has already seen a notable increase of 4.1% year-on-year in the first two months of 2025. This positive trend in investment is crucial for sustaining economic momentum as policymakers navigate complex global and domestic challenges.
However, the private sector's sentiment remains a concern, with weak confidence likely to continue dragging on overall growth. Policymakers are keenly aware of this challenge and are likely to introduce further measures to bolster private sector participation and confidence.
Consumption Growth and Property Market Dynamics
Consumption growth is anticipated to recover to mid-single-digit levels in 2025, supported by recent policy measures aimed at stimulating domestic demand. Over the weekend, Chinese policymakers unveiled a special action plan to boost consumption, reflecting their commitment to reviving consumer confidence and spending.
In the property market, the decline in February property prices was relatively modest compared to much of 2024. New home prices have decreased by 9.8% from their peak, while existing home prices are down by 16.9%. Despite these declines, primary market prices saw an increase in 18 cities, indicating some areas of strength within the property sector.
China's track record of achieving its growth targets remains intact, as policymakers continue to roll out policy support measures to mitigate the impact of tariffs and other external pressures on growth this year. The focus on consumption and property market stabilization underscores the government's multifaceted approach to sustaining economic momentum.
Global Market Reactions and Future Outlook
The global market's attention is now shifting toward the upcoming US Retail Sales data, ahead of key central bank events involving the Bank of England (BoE) and the Federal Reserve (Fed) later this week. These developments are expected to have significant implications for global economic trends and investor sentiment.
Gold prices have maintained their position below $3,000 in the European session on Monday, driven by rising trade tensions that have increased demand for safe-haven assets. This trend underscores the continued uncertainties facing the global economy and the need for investors to seek stability amid volatile conditions.
As China continues to navigate complex economic dynamics, its ability to exceed expectations with its first data release of 2025 highlights the resilience and adaptability of its economy. With policy measures in place to support growth and address challenges, China remains a key player in shaping global economic trends.