China on track to hit H1 growth targets, May data shows- ING

ING analysts project China will likely meet its growth target in the first half of 2025, revising their GDP forecast to 4.7% year-over-year, citing resilient consumer spending and strong exports despite a modest impact from U.S. tariffs. While May retail sales exceeded expectations, industrial production and fixed asset investment growth fell short, indicating continued uncertainty in investor sentiment and a worsening property market downturn, requiring a turnaround in consumer confidence for a sustainable recovery.

Analysis

ING analysts project China's economy is on track to achieve its growth target in the first half of 2025, leading to an upward revision of their 2025 GDP forecast to 4.7% year-over-year, although this remains below China's official 5% target. This outlook is supported by observed resilience in consumer spending and continued strength in exports, alongside May's stronger-than-expected retail sales growth, which suggests policy support measures are beginning to take effect. However, the economic picture is mixed, as May also saw below-consensus growth in industrial production and fixed asset investment. Industrial growth has reportedly slowed modestly, partly due to the impact of U.S. tariffs on low-end manufacturing, while subdued fixed asset investment reflects heightened investor uncertainty. The persistent downturn in the property market, which likely worsened in the first half of the year, and the critical need for a turnaround in consumer confidence remain key headwinds for a more sustainable and broad-based economic recovery.

Key Decisions for Investors

• Investors should consider the mixed signals from China's economy, acknowledging the positive momentum in retail sales while remaining cautious due to underperformance in industrial production and fixed asset investment.
• Monitor the impact of U.S. tariffs on Chinese manufacturing sectors and the trajectory of fixed asset investment, as these will be key indicators of investor sentiment and industrial health.
• Closely track Chinese consumer confidence levels and any developments in the property sector, as improvements here are critical for a sustained economic upturn and could signal broader recovery.
• Evaluate potential investment opportunities arising from further policy support, should Beijing aim to bridge the gap between independent forecasts like ING's 4.7% and the official 5% growth target.