Contrary to the many pessimistic comments, the Chinese economy seems less affected than expected by international tensions, the threat of a trade war with massive increases in customs duties as well as the reorganization of supply chains made necessary by Russia's invasion of Ukraine. The first estimate of GDP in the 2nd quarter of 2025 shows a growth rate of 5.2%, very marginally lower than that observed in the 1st quarter which was 5.4%. The official target of growth of around 5% in 2025 should therefore be achieved or, at least, approached.

This situation contrasts with the near stagnation observed in Japan and the European Union and with the uncertainties affecting the American economy such as inflationary risks triggered by the increase in customs duties and the fall of the dollar or the internal and external deficits which may cast doubt on the country's ability to finance them.

Foreign trade and industrial production have been the main drivers of Chinese growth. Exports grew by 5.9% over the first half of the year and the trend did not abate in June: +5.8% despite the numerous threats of higher customs duties. These may have encouraged exporting companies to speed up deliveries precisely so as not to have to endure them. But this explanation should not mask the profound evolution of their international strategy. This is no longer limited to the conquest of market shares in the major developed countries. Their development in Southeast Asia in particular has became a priority.

Launched ten years ago, the Belt and Road Initiative continues to fund infrastructure investment programs, creating a favorable climate for partnerships. It is supported by intense diplomatic activity within the framework of the many regional international organizations of which China is a member or with which it is associated, such as ASEAN.

The spectacular progress of the Chinese industry nevertheless allows it to increase its sales of high-quality products such as in the automotive industry with the breakthrough of a new giant in the sector, BYD. Its turnover increased by 500% between 2019 and 2024 thanks to the boom in the country of electric motorization. Registrations were up 12.6% again this year in the first five months. If Europe maintains its decision to ban the sale of internal combustion vehicles in 2035, it cannot be ruled out that, as with solar panels, most of the world's production of electric cars will be carried out by Chinese companies.

But household consumption is no longer the main driver of the economy despite the various support plans adopted by the government, such as the $42 billion in aid for the purchase of equipment offered to households and the liquidity injunction decided by the central bank in May for individuals. Retail sales slowed down in May (+4.8% year-on-year) compared with +6.4% in May. By the end of July, the Chinese authorities are expected to announce new measures to support consumption that could offset the consequences on activity of an escalation in the hardening of relations with the United States.

Investment slowed sharply in June, as while its growth during the first five months of the year had reached 3.7%, it is only 2.8% in the first half of the year. Alongside increased caution in certain sectors with overcapacity such as the steel industry, the main cause of this mediocre growth is in the real estate sector, which is still unable to emerge from the crisis it has been going through for two years now.

This situation has led Chinese leaders to launch a reflection on the living conditions of families, on the search for greater quality, mainly in cities. The Chinese Glorious Thirty were marked by a massive migration of the rural population to the cities where the jobs were located. Factories were located on the outskirts of the city, and millions of homes were quickly built. The continuation of this model of urbanization no longer corresponded to the expectations of families. Housing in large housing estates has not sold anymore and this has caused the bankruptcy of several developers, including the largest of them, Evergrande.

The financial measures adopted to mitigate the consequences of this crisis have not, for the moment, yielded the expected results. This is why a deeper reflection has been initiated, which has resulted in the Chinese president's positions on the progress to be made in the quality of life in cities: building modern cities by reducing urban density, providing places of leisure with green spaces. Discussions on these new subjects have taken place in recent weeks at meetings of the Communist Party's leading bodies and government bodies. They have been little mentioned in the international press, but if they were successful, we would see a turning point in the Chinese economy.

The other growth driver highlighted is the development of consumption of services by households. First of all, there is tourism, within the country but also all around with Taiwan but also South Korea and its Asian neighbours. Infrastructure will be strengthened and regulatory barriers will be relaxed vis-à-vis foreign countries. Then there are personal services. To encourage families to have children, which has become a priority after having long been considered a threat, it is necessary to make people available to households who can reconcile family and professional life.

These two projects, modernizing cities to make them more livable and promoting access to services for households, should be among the next measures expected to support growth if it turns out to be affected by the international environment. The country is not short of resources. Although it attaches great importance to the stability of its currency and pushes every day for its use in trade, it has considerable reserves of foreign currency and gold. Inflation is low, below 1%, which is a guarantee of competitiveness for companies and Beijing can call on the financial markets to finance a possible increase in public spending or tax cuts.

Trust in Chinese companies is solid. The Shanghai Stock Exchange index has risen roughly like the Dow Jones since the beginning of the year. As for the other markets where Chinese companies are listed, Hong Kong, Singapore and even Taiwan, the indices all saw double-digit increases. This is proof that observers consider that the managers of these companies have in their hands the solutions that will allow them to deal with a possible aggravation of international tensions.

The Chinese economy is undergoing a double transformation. The first is geographical, with a diversification of markets where companies source and find new customers. The second is societal. We need to move to a new model where the development of families depends on providing them with a living environment and services that correspond to their needs. Given past results, it would be very unwise to assume that these changes will not be successful and that they will not support the country's growth.