1 China’s official H1 2025 data hints at more economic woes in the second half
PBoC H1 financial data
July 14
The People’s Bank of China released financial and social financing data for the first half of 2025.
Financial data
- Broad money supply (M2) increased 8.3 percent year-on-year to 330.29 trillion yuan in H1 2025. This was a significant rebound from last year’s 6.2 percent and underscores a marked loosening of monetary policy.
- Narrow money (M1) increased by 4.6 percent year-on-year to 113.95 trillion yuan in H1 2025. This marked a notable recovery from a 5 percent decline in the same period last year, signaling a significant improvement in liquidity structure.
- Renminbi loans grew by 12.92 trillion yuan in H1 2025, slightly below the 13.27 trillion yuan recorded in the same period of 2024. This reflects subdued credit demand.
- Household loans rose by 1.17 trillion yuan in H1 2025, compared with an increase of 1.46 trillion yuan in the same period last year. Notably, short-term household loans recorded a historic net decline of 300 million yuan, while medium- and long-term loans, primarily mortgages, rose by 1.17 trillion yuan. The figures underscore subdued residential borrowing amid a sluggish real estate market.
- Corporate and institutional loans increased by 11.57 trillion yuan in H1 2025. This included 4.3 trillion yuan in short-term loans and 7.17 trillion yuan in medium- and long-term loans. Bill financing decreased by 46.4 billion yuan.
- Non-bank financial institution loans grew by 33.1 billion yuan, significantly lower than the 388.9 billion yuan recorded in 2024.
- RMB deposits increased 8.3 percent year-on-year to 320.17 trillion yuan in H1 2025. New deposits totaled 17.94 trillion yuan, much higher than last year’s 11.46 trillion yuan.
- Household deposits surged by 10.77 trillion yuan in H1 2025, a marked improvement from 9.27 trillion yuan in H1 2024.
- Non-financial corporate deposits rebounded sharply, growing by 1.77 trillion yuan compared to a 1.45 trillion yuan decline last year. Both fiscal deposits and non-bank financial institution deposits recorded positive growth, signaling broad-based deposit accumulation.
Social financing data
- Total social financing increased by 22.83 trillion yuan in H1 2025, up 4.74 trillion yuan from a year ago.
- Net corporate bond financing reached 1.15 trillion yuan, down 256.2 billion yuan year-on-year. The marked decline in corporate bond issuance reflects weakened corporate borrowing demand and heightened market risk aversion.
- Net government bond financing increased to 7.66 trillion yuan, up 4.32 yuan from a year ago and accounting for over 90 percent of the social financing increment. This underscores the economy’s heavy reliance on fiscal borrowing to sustain growth.
NBS H1 economic data
July 15
The National Bureau of Statistics released economic data for June and the first half of 2025. Along with the data, the NBS claimed that “the national economy withstood pressure, overcame difficulties, and maintained overall stability with steady improvement” under the “strong leadership of Party Central with Comrade Xi Jinping at the core.”
GDP
- China’s GDP in Q2 2025 increased by 5.2 percent year-on-year to 34.18 trillion yuan.
- China’s GDP in H1 2025 increased by 5.3 percent year-on-year to 66.05 trillion yuan.
Nationwide fixed asset investment (excluding rural households)
- China’s fixed asset investment increased by 2.8 percent year-on-year to 24.87 trillion yuan (calculated using a comparable caliber) in H1 2025.
- State-owned investment increased by 5.0 percent.
- Private investment decreased by 0.6 percent.
- Foreign-invested enterprise investment decreased by 13.6 percent.
National real estate market
- Real estate development investment decreased by 11.2 percent year-on-year to 4.67 trillion yuan (calculated using a comparable caliber) in H1 2025. Residential investment, a key component, reached 3.58 trillion yuan, reflecting a 10.4 percent decline.
- The sales area of new commercial housing decreased by 3.5 percent year-on-year to 458.51 million square meters in H1 2025. Residential sales area fell by 3.7 percent to 383.58 million square meters.
- The sales value of new commercial housing decreased by 5.5 percent year-on-year to 4.4241 trillion yuan. Residential sales value decreased by 5.2 percent to 3.8849 trillion yuan.
Sales prices of housing in 70 major Chinese cities
- In June 2025, both new and second-hand residential housing markets exhibited month-on-month declines, though year-on-year declines narrowed, indicating ongoing market adjustment. Structural divergence is evident across city tiers, with first-tier cities showing varied performance (Shanghai saw price increases due to the availability of new high-end housing, while cities like Beijing saw slight corrections), while third- and fourth-tier cities face deeper corrections.
First-tier cities
- New homes: Month-on-month prices dipped slightly by 0.3 percent, with year-on-year declines narrowing to 1.4 percent.
- Beijing: Down 0.3 percent month-on-month and down 4.1 percent year-on-year.
- Shanghai: Up 0.4 percent month-on-month and up 6.0 percent year-on-year.
- Guangzhou: Down 0.5 percent month-on-month and down 5.1 percent year-on-year.
- Shenzhen: Down 0.6 percent month-on-month and down 2.5 percent year-on-year.
- Second-hand homes: Prices continued to fall (down 0.7 percent month-on-month), with year-on-year declines slightly widening to 3.0 percent.
- Beijing: Down 1.0 percent month-on-month and down 1.8 percent year-on-year.
- Shanghai: Down 0.7 percent month-on-month and down 1.3 percent year-on-year.
- Guangzhou: Down 0.7 percent month-on-month and down 5.9 year-on-year.
- Shenzhen: Down 0.5 percent month-on-month and down 2.8 percent year-on-year.
Second-tier cities
- New homes: Prices edged down 0.2 percent month-on-month and down 3.0 percent year-on-year, suggesting market stabilization.
- Second-hand homes: Month-on-month declines widened to 0.6 percent and year-on-year drops remained significant at 5.8 percent, reflecting ongoing pressure despite rising replacement demand.
Third- and fourth-tier cities
- New homes: Month-on-month declines of 0.3 percent and year-on-year declines of 4.6 percent both narrowed from a year ago, indicating a stabilization trend.
- Second-hand homes: Prices fell 0.6 percent month-on-month and 6.7 percent year-on-year, or larger declines than in second-tier cities and reflecting higher inventory and greater market correction space.
Retail sales of consumer goods
- Retail sales of consumer goods in June 2025 increased 4.8 percent year-on-year to 4.2287 trillion yuan. Retail sales excluding automobiles also increased by 4.8 percent to 3.7649 trillion yuan.
- Retail sales of consumer goods in H1 2025 increased 5.0 percent year-on-year to 24.5458 trillion yuan. Retail sales excluding automobiles increased by 5.5 percent to 22.1990 trillion yuan, signaling steady consumer spending growth despite real estate headwinds.
Our take
A deeper dive into the PRC’s official data reveals profound structural issues with China’s economy, contradicting Beijing’s rhetoric of how the economic development is “stable with positive momentum” (穩中向好) under the Party’s leadership. The CCP’s own data signals what is likely to be a sharp economic deterioration in the second half of 2025, driven by a heavy reliance on government debt and fiscal stimulus, sluggish real economy demand, a deepening real estate crisis, collapsing consumer and investment confidence, escalating trade frictions, and persistent domestic deflationary pressures.
1. China’s social financing scale reveals significant “inflation” in reported growth, with the government emerging as the sole engine of incremental expansion.
In the first half of 2025, China’s social financing scale grew by 22.83 trillion yuan, which seems like a robust increase compared to 2024. However, the growth looks less robust in parsing the data:
- Net government bond financing formed the bulk of total social financing. This reflects unprecedented fiscal deficits at the central and local levels, with governments resorting to aggressive bond issuance to stabilize growth. Such aggressive bond issuance further strains the fiscal sustainability of the central and local authorities.
- The decrease in net corporate bond financing signals that companies are showing declining appetite and capacity for long-term borrowing (which hints at poor business prospects) and weakened bond market functionality.
- Non-standard financing channels, including entrusted loans, trust loans, and bill financing, continued to shrink or grow more slowly, reflecting low private sector confidence and constrained financing avenues for private enterprises and local government platforms.
2. In May 2025, the PBoC reduced the reserve requirement ratio to sustain loose liquidity, spurring a rebound in M2 growth in the first half of the year. However, credit demand fell short of expectations, hampered by severe structural imbalances:
- M2 and loan dynamics: The significant jump in the M2 money supply (330.29 trillion yuan) and slight decrease in RMB loans (12.92 trillion yuan, down from 13.27 trillion yuan in 2024) in the first half of 2025 signal that loose monetary conditions failed to drive robust credit demand.
- Corporate lending concerns: The growth in corporate loans appeared to show resilience, but actually masked underlying issues. Short-term loans (4.3 trillion yuan) comprised nearly 40 percent of the total (37 percent), compared to 7.17 trillion yuan in medium- and long-term loans. This heavy reliance on short-term borrowing reflects defensive corporate strategies focused on cash flow management, risk hedging, and “borrowing new to repay old” rather than capacity expansion or technological upgrades. The preference for short-term debt underscores weak long-term investment confidence and heightened operational uncertainty, with firms favoring quick, low-risk maneuvers over strategic growth.
- Household lending weakness: Household loans grew by only 1.17 trillion yuan, down from 1.46 trillion yuan in 2024, reflecting continued consumer deleveraging. Growth was driven entirely by medium- and long-term loans (mortgages), while short-term loans recorded a net decline, highlighting pessimistic consumer expectations for income and employment, alongside subdued consumption and home-buying sentiment.
- Deposit surge signals caution: RMB deposits surged by 17.94 trillion yuan, far outpacing loan growth (12.92 trillion yuan). Household deposits rose by 10.77 trillion yuan, dwarfing household loan growth (1.17 trillion yuan), indicating a strong preference for saving over spending or investing. Corporate deposits shifted from a 1.45 trillion yuan decline in 2024 to a 1.77 trillion yuan increase, but their share of total deposit growth remained below 10 percent, suggesting persistent financial pressures on firms.
These trends signal a marked decline in China’s economic vitality. Both households and firms are gravitating toward cash and low-risk assets, with credit failing to translate into new investment or consumption momentum. This underscores the diminishing effectiveness of Beijing’s monetary policy, as easing struggles to stimulate meaningful demand.
3. Fixed asset investment in the first half of 2025 reveals stark disparities. State-controlled entities, buoyed by fiscal support, grew by 5.0 percent. Meanwhile, private investment declined by 0.6 percent and foreign investment plummeted by 13.6 percent. This divergence underscores heavy reliance on state-driven growth, with private and foreign sectors grappling with financing constraints and severe confidence deficits. The divergence also signals a broader erosion of market dynamism.
The sustained decline in real estate investment and sales transcends cyclical adjustment, pointing to a systemic crisis. Housing prices for new and second-hand homes in 70 major cities continued to trend downward in June 2025, with no signs of stabilization. This reversal of the wealth effect is shrinking household assets, further suppressing consumption and investment appetite.
4. Retail sales of consumer goods in the first half of 2025 appeared to rebound, driven by several holiday periods and government subsidies that spurred preemptive consumption. However, this growth is likely unsustainable, as it hinges on temporary stimulus measures that, once exhausted, may see spending revert to prior weakness.
Moreover, retail sales data raises questions about accuracy. Among first-tier cities, only Shanghai (151.665 billion yuan, 7.5 percent increase year-on-year) exceeded the national retail growth rate of 6.4 percent for in May 2025, while Beijing (112.01 billion yuan, 0.4 percent decrease YoY), Guangzhou (93.91 billion yuan, 3.98 percent increase YoY), and Shenzhen (95.42 billion yuan, 2.05 percent increase YoY) lagged behind. These cities, which account for approximately 10.96 percent of national retail sales and represent China’s strongest consumer markets, underperformed the national average, casting doubt on the reliability of official statistics and suggesting potential data manipulation.
5. China’s Q2 2025 GDP growth of 5.2 percent slightly outperformed analyst expectations of 5.1 percent. Setting aside concerns about data falsification, this growth may reflect accelerated exports in the first half of the year to circumvent U.S.-China trade tariffs. However, if trade negotiations fail to reduce tariffs or if first-half export surges lead to overextension, a “cliff-like” export decline could materialize in the second half of the year and drag down GDP growth.
China calculates GDP using the production method, with consumption and fixed asset investment as key drivers. While consumption’s contribution has risen, its absolute level remains weak and potentially inflated. Investment relies heavily on infrastructure and manufacturing upgrades but is hampered by the real estate sector’s drag, coupled with severe overcapacity, price wars, and inventory pileups. These factors call into question the credibility of official GDP figures.
Using the GDP deflator (which measures the gap between nominal and real GDP), China’s Q2 2025 nominal GDP growth was 3.9 percent, with the deflator recording negative year-on-year growth for the ninth consecutive quarter. This marks China’s longest deflationary streak since 2000, surpassing the Asian Financial Crisis, and underscores persistent deflationary pressures.
6. China’s first-half 2025 economic data reveals a vicious cycle of debt, deflation, and eroding confidence. Based on these trends, the economy is poised for a significant downturn in the second half.
Nomura Securities noted in a July 9 report that China faces a “demand cliff” in the second half, citing multiple factors like slowing exports under U.S. tariffs, the fading boost from a consumer goods trade-in program, austerity measures, and a continued property slump. Nomura also projected China’s full-year GDP growth to slow from 5.1 percent in the first half to 4 percent in the second half.
