Burghley Capital Highlights China's Q2 Economic Resilience

China's Economy Demonstrates Robust Growth in Q2, Outperforming Expectations Despite Retail and Property Sector Headwinds and Looming US Trade Uncertainties

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China's economic growth demonstrates clear signs of resilience and strength, with Burghley Capital noting GDP expansion of 5.2% year-on-year in the second quarter of 2025, surpassing market consensus forecasts of 5.1%. This steady performance follows the first quarter's expansion rate of 5.4%, reinforcing confidence in the economy's capacity to sustain growth in challenging global conditions.

Sequentially, the economy grew by 1.1% during the quarter, ahead of market predictions of 0.9%. Notably, industrial output increased significantly, growing 6.8% year-on-year in June, substantially outperforming expectations of 5.7%. These results reflect the strength and adaptability of China's industrial sectors despite pressures from fluctuating global trade conditions.

Burghley Capital's assessment confirms the alignment of current growth rates with Beijing's annual growth target of approximately 5%. The company highlights the critical role played by export acceleration, credit expansion, and targeted consumer incentives in sustaining economic activity, although these elements introduce complexities for institutional investors managing long-term portfolio strategies.

Despite these robust headline figures, underlying economic vulnerabilities remain pronounced, especially in retail and property sectors. Retail sales growth slowed to 4.8% year-on-year in June from 6.4% in May. Meanwhile, property investment experienced an 11.2% decline over the first half of the fiscal year, reflecting deeper challenges within the real estate sector. The resultant property price correction has led to approximately USD 16.8 trillion in household wealth erosion, underlining significant socio-economic implications.

Consumer sentiment remains notably cautious, stabilising well below historical peaks. Targeted policy interventions by Beijing, such as doubling consumer trade-in programme quotas to USD 41.6 billion and committing USD 416 billion towards infrastructure investments, have partially supported consumer sectors without yet achieving comprehensive consumption recovery.

In response to these economic pressures, policymakers implemented monetary easing measures, including a 10-basis-point reduction in the seven-day reverse repurchase rate to 1.40%, alongside a 50-basis-point cut in the reserve requirement ratio, injecting approximately USD 138.8 billion into financial markets. Burghley Capital indicates that fiscal constraints remain significant, limiting further stimulus actions to measured responses aimed at balancing economic stability and risk management.

The impending expiration of temporary US-China trade agreements on 12 August 2025 further heightens economic uncertainty. Tariffs risk significant escalation, potentially rising to 145% on US imports from China and 125% on Chinese imports into the US without a new bilateral agreement. Burghley Capital identifies potential disruptions from renewed trade tensions, cautioning that institutional portfolios may face material impacts requiring strategic adaptations to mitigate emerging risks effectively.

Export front-loading, previously bolstering second-quarter performance, is anticipated to diminish over the coming months, posing additional challenges to growth momentum. Burghley Capital's strategic analysis suggests potential export contractions of around 4.75%, resulting in a GDP reduction of approximately 0.7% should tariff escalations materialise.

Nevertheless, Burghley Capital maintains a cautiously optimistic outlook, underscoring the importance of strategic asset allocation strategies tailored to China's evolving economic dynamics. Institutional investors are advised to balance potential sectoral opportunities against macroeconomic uncertainties, ensuring robust portfolio resilience in navigating China's economic trajectory through the remainder of 2025.

About Burghley Capital

Established in 2017, Burghley Capital Pte. Ltd. (UEN: 201731389D) is a global investment management firm headquartered in Singapore, renowned for its specialist expertise in long-only asset management strategies. The firm delivers strategic market advantages through meticulous analytical insights, tailored investment approaches, and dedicated financial advisory solutions. Committed to disciplined investment practices, Burghley Capital consistently strives to generate exceptional returns and ensure financial resilience for its diverse clientele, including institutional investors and private clients worldwide.

For additional insights, please visit https://burghleycapital.com/resources. Media enquiries can be directed to Martin Wei at m.wei@burghleycapital.com [mailto:m.wei@burghleycapital.com] or visit https://burghleycapital.com.

Disclaimer: This press release includes statements that may be regarded as forward-looking. Such statements reflect current expectations, strategic plans, anticipated results, and projected outcomes related to economic performance, regulatory developments, and business initiatives. Readers should be aware that these statements carry inherent risks and uncertainties. Actual outcomes may differ materially from projections due to various unforeseen circumstances or events, and Burghley Capital does not undertake to update or revise these forward-looking statements as future conditions evolve.

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