Michelle ThompsonChina’s national economy has had a strong start to the year, marked by positive growth momentum. Official data for January and February revealed that industrial output, retail sales, and fixed-asset investment all grew at a faster rate compared to the previous year.
The total value added by industrial enterprises with above-designated size increased by 5.9% year-on-year, outpacing the full-year growth rate of 2024 by 0.1 percentage points, according to the National Bureau of Statistics (NBS).
The services sector showed robust growth, with modern services expanding rapidly. The Index of Services Production rose by 5.6%, 0.4 percentage points higher than the growth rate for 2024.
National retail sales reached 8.37 trillion yuan ($1.16 trillion) in the first two months, a 4% increase from the previous year, exceeding the 2024 growth rate by 0.5 percentage points. The impact of consumer goods trade-ins was evident, with notable sales increases in communication equipment (26.2%), cultural and office supplies (21.8%), furniture (11.7%), and household appliances (10.9%).
Fixed-asset investment reached 5.26 trillion yuan, growing by 4.1% from a year earlier, 0.9 percentage points higher than the full-year growth rate for 2024.
The data exceeded consensus expectations, driven by policy-driven industrial production, infrastructure spending, and consumer goods trade-ins. Analysts at Morgan Stanley noted that fixed-asset investment saw the largest surprise, with housing investment rising as expected, along with stronger-than-anticipated manufacturing and infrastructure investment due to policy support. Industrial production also showed a stronger-than-expected performance, despite somewhat weaker exports.
According to Fu Linghui, an NBS spokesperson, the combination of macro policies, deeper reforms, and improved social confidence has laid a solid foundation to achieve the annual economic growth target of about 5%. He also highlighted the continued recovery of the services sector, which is crucial for absorbing new workforce entrants.
Veteran economist Tian Yun also noted that, with the current pace of consumption and investment recovery, a 5% growth target for the year is achievable. The Communist Party of China and the State Council have recently issued an action plan to boost consumption, stimulate domestic demand, and increase household spending power.
Policy implementation is accelerating following the recent two sessions, with improved timing, intensity, and effectiveness expected to stimulate domestic demand and mitigate external uncertainties such as potential U.S. tariff hikes, according to Wen Bin, chief economist at China Minsheng Bank.
However, Fu warned that challenges remain, such as a complex external environment and weak domestic demand. Despite this, exports continued to grow, particularly in mechanical and electrical products, demonstrating China’s strong international competitiveness and resilience in foreign trade.
While challenges in foreign trade are expected, efforts will be made to stabilize the real estate and stock markets, which are crucial for boosting consumption recovery and attracting foreign investment. Fu also mentioned that favorable conditions exist for continued steady and healthy economic development in 2025, with advantages such as a large market, comprehensive industrial system, and abundant human capital.
