China's 2025 growth target of around 5 percent remains achievable despite major trade disruptions, while a sustained recovery will hinge on structural reforms to bolster consumer confidence and unlock long-term growth potential, said a renowned expert.
"As long as tariffs stay at current levels and trade tensions don't escalate, it's reasonable to expect growth to come close to that 5 percent target," said Ben Simpfendorfer, a partner at consultancy Oliver Wyman. "Exports aren't the only engine — real estate and consumer spending also play key roles."
Data from the National Bureau of Statistics showed China's retail sales grew 6.4 percent year-on-year in May compared with a 5.1 percent rise in April, the fastest pace since late 2023.
With consumer figures improving in the short term, much of the recent support has come from the trade-in deals for consumer goods, but Simpfendorfer cautioned against relying too heavily on such tools.
"They do play a role and there is short-term influence, but it's not a medium-term driver of consumer spending," he said during a recent exclusive interview with China Daily. "Ultimately, what we need to see is sustained recovery in consumer confidence, but equally, the types of structural reforms that would provide consumers with the confidence to spend."
These reforms, he suggested, could include "more support for education expenses, health expenses, a stronger social safety net so that lower-middle-income households feel confident in the outlook and confident enough to spend".
Looking into the second half of the year, Simpfendorfer said that "while the challenges may not be greater, they still exist".
As such, he expects Beijing to remain measured in its fiscal response. "Fiscal measures are important, but I wouldn't expect the government to turn on its full fiscal firepower. It does need to conserve money for future risks, so it will be modest," he said.
Simpfendorfer described China's current recovery path as "a marathon, not a sprint", seeing a medium-term transformation underway.
"It means a transition or evolution from being a purely manufacturing hub into an innovation hub, ensuring that artificial intelligence is wired into all parts of the economy to improve efficiency and productivity," he said. "Combine that with stronger consumer sentiment and stabilization in the property market and all of a sudden, you have the conditions for a much stronger recovery. That's a multi-year story, not a multi-quarter story."
The property sector, a drag on China's growth, may be nearing a turning point.
"We haven't yet reached the bottom, but we're getting very close," Simpfendorfer said. "The government is now taking quite reasonable measures to support the property sector without providing excessive support that would only contribute to future imbalances."
He added, "It may take at least another year or more until we get there, but for now the property sector is no longer such a drag on growth that it was in previous years."
On the consumption front, Simpfendorfer said boosting demand for services — rather than just goods — would be key to unlocking China's vast consumer potential.
"In most countries, services account for the largest share of consumption — whether that's health, education, tourism or simply going to see a movie," he said. "Strengthening services consumption will be the key to unlocking the Chinese consumer spending."
He also welcomed recent support for tourism and called for broader regulatory efforts to support other service areas like healthcare and education. "It's showing that the regulations are in place to encourage development of the services sector, especially in areas where there may not be full development."
Looking at the next few years, Simpfendorfer believes China's strength lies in its ability to innovate and scale. "The most resilient part of China's economy is the ability of the country to both innovate and build ecosystems around that innovation," he said.
"China will be an anchor for global manufacturing, for global innovation. It will also obviously play an important role in exporting some of these successes to the Global South. The developed world will also find that China remains an important commercial partner for many companies and economies."
Zhang Xiaoyan, associate dean at Tsinghua University's PBC School of Finance, expressed confidence in the foundations of the Chinese economy, even as she acknowledged continued global and domestic challenges.
"There are obviously a lot of challenges, but China's economy has been growing very steadily over the past years," Zhang said.
"I am positive China can achieve the annual growth target of around 5 percent in 2025," she said in an exclusive interview with China Daily. "Starting from last September, there have been very powerful stimulants from both the monetary and fiscal policy fronts."
Looking ahead, Zhang believes that the key drivers of China's future growth will be technological innovation and public confidence.
Citing the success of the Deep-Seek AI model, she added: "In the past, people worried (that) China could never develop AI models comparable to US models. But we've proven that, even with less computing power, we can still build something beautiful and powerful."
Zhang emphasized the strength of China's innovation ecosystem, which combines regulatory support, talent development, and capital market participation. "It's not just one part of the market doing the right thing. It's the regulators, the financial services industry, the universities — we're all working to create an innovation-friendly environment," she said.
Zhang also urged continued efforts to maintain momentum.
"China should keep doing the right things — regulations being open, fostering high-end technologies, cultivating the most-needed professionals, and ensuring capital flows into high-potential sectors," she said. "If we keep doing those things, the success will continue."
Zhang pointed to consumption as another critical growth engine. "We used to be a manufacturer for the whole world. Now, we're looking for new growth breakthroughs," she said. "Consumption upgrading is a super strong driver for economic transformation."
Data from the National Development and Reform Commission show that China's domestic demand contributed an average of 86.4 percent to the country's economic growth during the past four years, with final consumption contributing 56.2 percent, an increase of 8.6 percentage points compared with the 13th Five-Year Plan (2016-20) period.
During a news conference held in Beijing recently, Yuan Da, secretary-general of the NDRC, highlighted China's ultra-large domestic market with huge growth potential, saying "domestic demand has always been the main driver and stabilizer of China's economy".
"We will place greater emphasis on strengthening domestic circulation, steadfastly implement the strategy of expanding domestic demand, and speed up the development of a comprehensive domestic demand system," he said.
Zhang agreed, highlighting China's long-standing strategy of building a new development paradigm featuring dual circulation, in which domestic and overseas markets reinforce each other, with the domestic market as the mainstay.
"Our domestic market is pretty big and stable by itself," she said. "If there is too much uncertainty outside of China, we can still have some stable growth."
By Wang Keju and Ouyang Shijia for the China Daily.
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