世界银行-中国经济更新_2025年6月_释放消费（英）_45页_2mb

China Economic Update - June 2025 Summary

Analysis

GDP Growth

Economic growth was solid in early 2025, supported by fiscal and monetary policies, manufacturing investment, and exports. In the first quarter, real GDP grew by 5.4% year-on-year, consistent with the previous quarter. Projections indicate growth slowing to 4.5% in 2025 and 4.0% in 2026, primarily due to export headwinds from heightened uncertainty and China's increasing trade restrictions.

Consumer Demand

Consumption remains below pre-pandemic levels, driven partly by fiscal subsidies. Despite stimulus efforts, household confidence is weak, reflecting lower income growth, declining home prices, and precautionary savings. Services and retail sales have slowed, contributing only 2.8 percentage points to year-on-year growth compared to an average of 3.6 in 2019.

Property Sector

Demand rebounded in top-tier cities due to easing policies, but the sector remains weak overall, with persistent inventory destocking issues in tier-3 cities. Strains in the supply side led to a drag on investment and employment, partly due to financing challenges for developers.

Fiscal Policy

Fiscal stimulus is expected at 1.6% of GDP in 2025, dominated by public investment and increased consumer subsidies. Revenue declined amid pandemic-related effects and weak business performance, resulting in a 2.0% of GDP fiscal deficit for the first quarter of 2025. Tax pressure remains high, with broadening transfers becoming essential for sustained growth support.

Monetary Policy

Monetary easing has kept real interest rates relatively high due to low inflation. Credit growth has declined due to subdued demand from private sector, constrained both by high debt burdens and policy uncertainties. Bank profitability faces pressure as funding costs and write-offs have declined NIMs but positive trends remain possible.

Labor Market & Employment

Urban unemployment has hovered around 5% since 2018, but underlying challenges in employment creation in the tertiary sector remain. Job growth has diverged across sectors— manufacturing supported by exports but facing risks, construction hampered by the property downturn, and services constrained by subdued household demand. Informal, rural migrant, and youth workers have been disproportionately affected by weaker job security and income insecurity.

Special Focus: Transition in Jobs

Technology— automation, AI, and digitalization—has reshaped demand for skills, with a decline in routine manual sectors and a rise in high-skilled jobs. Digitalization has created flexible opportunities but with limited social protection. Greater investment in skills development and fostering a more progressive labor market system through enhanced social protection are critical for inclusive growth.

Outlook

Current projections for growth are near-term. The deepening global uncertainty, structural trade headwinds, and labor market pressures indicate the need for reforms beyond short-term stimulus. Transitioning toward household-driven growth by rebalancing fiscal priorities toward social protection programs and progressively taxes remains essential.

Key Recommendations

• Strengthening Fiscal & Market Reforms: Consign more resources toward social protection to enhance income security and household consumption. Level the playing field for private investment and improve credit access for MSMEs.
• Social Protection & Labor Policies: Extend coverage for social programs to informal workers and migrants, simplify enrollment, decouple benefits from urban hukou, and facilitate labor mobility.
• Skills & Technological Adaptation: Enhance active labor policies, expand STEM education for high-tech skills and improve orientation for displaced workers in routine roles.
• Market Monitoring: Improve labor market data infrastructure to better resolve technological challenges, update skill training, and inform policy design.