• Investing
  • Stock
  • Economy
  • Editor’s Pick
Portfolio Performance Today
Stock

Commerzbank sees China economic growth slowing in second half of 2025

by June 27, 2025
by June 27, 2025

The recent rise in retail sales growth in China due to stimulus measures is just temporary, according to Commerzbank AG. 

The policy impact is unlikely to be long-lasting, the German bank said. 

A significant increase in loss-making businesses indicates a gloomy outlook for business confidence and employment, subsequently impacting consumer confidence.

“Therefore, Beijing has a lot more work to do if the policymakers want to prioritize lifting consumption as one of the key policy goals,” Tommy Wu, senior economist at Commerzbank AG, said in a report. 

Strong industrial output and higher-than-anticipated retail sales growth indicate a robust first half of 2025.

Both grew by approximately 6% year-on-year in real terms during April-May.

These figures indicate that GDP might surpass our expectations again in Q2, potentially growing over 5% year-on-year, following a 5.4% growth in Q1, Wu said.

Source: Commerzbank Research

Consumption stimulus programs lack lasting effects.

Retail sales have benefited from the government’s trade-in program, which offers subsidies for major consumer purchases like home appliances, cars, and consumer electronics. 

However, the program has faced challenges. 

By early June, over half of the CNY300 billion allocated by Beijing for this year’s trade-in program had already been distributed.

This high consumer participation has led to local governments quickly exhausting their subsidy funds.

Local governments may soon receive the remaining program funds from the central government.

Wu said:

However, in our view, it is unclear whether consumer confidence has actually improved, given that the outlook for jobs and incomes has remained uncertain.

Despite hovering around zero in recent months, CPI inflation has failed to reverse the weak underlying demand, a trend exacerbated by a worsening PPI deflation of (-)3.3% in May. 

This suggests the protracted deflationary cycle since 2023 will be difficult to overcome.

Since 2023, the GDP deflator, a comprehensive indicator of economy-wide prices, has remained in deflationary territory.

To survive weak demand, firms are cutting prices, exemplified by China’s auto market price war where some EV models saw over one-third price reductions. 

This aims to attract demand despite government stimulus supporting auto and other big-ticket consumer goods.

“This is a reflection of how weak the underlying consumer demand has been,” Wu added. 

Private sector weakness hits job creation

Deflation has significantly impacted corporate profitability, with the proportion of loss-making firms rising from just under 10% in 2011 to 23% in 2024. 

This increase is primarily attributable to the private sector.

Although the surge in loss-making private companies since 2021 can be partially linked to the current real estate downturn, this upward trend began much earlier, in 2017.

Source: Commerzbank Research

Market competition appears to have been consistently intense, leading to a build-up of over-capacity.

A lack of profitability and weak confidence will deter businesses from hiring.

“As the problems of overcapacity and employment are structural, Beijing needs to allow and initiate meaningful reforms and consolidation in various industries to resolve these problems,” Wu said. 

Limitations

Due to a lack of tax and land sales revenues, the government sector must increase its borrowing, a necessity driven by the slow economy and ongoing housing downturn, according to Commerzbank.

By 2025, the central government’s debt is expected to be under 30% of GDP, which is low when compared internationally. 

However, local government debt, encompassing both official debt and that from local government financing vehicles, is projected to exceed 100% of GDP according to the German bank’s calculations.

Source; Commerzbank Research

It has been widely contended that the central government has the capacity to assume a greater debt burden on behalf of local administrations.

“While this is true to some extent, we believe there is a limit as to how much more debt the government can carry,” Wu added.

Fiscal limitations are likely to eventually curb the current policy stimulus.

Our concern is that, once the stimulus slows or even stops, the macro picture will worsen again.

The post Commerzbank sees China economic growth slowing in second half of 2025 appeared first on Invezz

0 comment
0
FacebookTwitterPinterestEmail

previous post
JSW Paints to buy Akzo Nobel India for $1.6 billion in major Indian paints market shake-up
next post
Trump v Powell: The Credibility Cost of Politicized Monetary Policy

Related Posts

Asian markets open: Nikkei hits another record high,...

October 7, 2025

Top reasons why the Topix and Nikkei 225...

October 7, 2025

Goldman Sachs boosts 2026 gold price forecast to...

October 7, 2025

Beijing intensifies oil stockpiling amid global supply and...

October 7, 2025

Trump’s new 25% truck tariff targets imports from...

October 7, 2025

CAC 40 Index outlook: Understanding the decline and...

October 7, 2025

DAX Index analysis: Why German stocks are rising...

October 7, 2025

Europe markets open: Stoxx 600 flat, CAC 40...

October 7, 2025

LG India’s $1.3B share sale highlights record IPO...

October 7, 2025

Trilogy Metals shares soar over 200% as White...

October 7, 2025

Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.

By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

Recent Posts

  • The OECD’s Warning to America: Economic Growth Is Slipping

    October 7, 2025
  • Semiconductor Giants with Tech-Industrial Ambitions

    October 7, 2025
  • Will Bitcoin Strengthen or Weaken US Dollar Dominance?

    October 7, 2025
  • Asian markets open: Nikkei hits another record high, Sensex up 140 pts

    October 7, 2025
  • Top reasons why the Topix and Nikkei 225 indices are soaring

    October 7, 2025
  • Goldman Sachs boosts 2026 gold price forecast to $4,900 amid strong demand

    October 7, 2025

Editors’ Picks

  • 1

    Meta executives eligible for 200% salary bonus under new pay structure

    February 21, 2025
  • 2

    Walmart earnings preview: What to expect before Thursday’s opening bell

    February 20, 2025
  • 3

    New FBI leader Kash Patel tapped to run ATF as acting director

    February 23, 2025
  • 4

    Cramer reveals a sub-sector of technology that can withstand Trump tariffs

    March 1, 2025
  • 5

    Anthropic’s newly released Claude 3.7 Sonnet can ‘think’ as long as the user wants before giving an answer

    February 25, 2025
  • 6

    Nvidia’s investment in SoundHound wasn’t all that significant after all

    March 1, 2025
  • 7

    Pop Mart reports 188% profit surge, plans aggressive global expansion

    March 26, 2025

Categories

  • Economy (2,804)
  • Editor's Pick (280)
  • Investing (185)
  • Stock (1,914)
  • About us
  • Contact us
  • Privacy Policy
  • Terms & Conditions

Copyright © 2025 Portfolioperformancetoday.com All Rights Reserved.

Portfolio Performance Today
  • Investing
  • Stock
  • Economy
  • Editor’s Pick
Portfolio Performance Today
  • Investing
  • Stock
  • Economy
  • Editor’s Pick
Copyright © 2025 Portfolioperformancetoday.com All Rights Reserved.

Read alsox

SWARMS price prediction: Swarms to release a...

March 19, 2025

Meta to halt political ads in EU...

July 26, 2025

Top catalysts for DAX Index and best...

August 17, 2025