Traders work on the floor of the New York Stock Exchange (NYSE) at the opening bell in New York City on February 12, 2025. (Photo by ANGELA WEISS / AFP)

Markets rallied on Tuesday following news that China’s economy grew by 5.2% in the second quarter of 2025, in line with forecasts and fuelled by a surge in exports. The official data, released by Beijing, offered a degree of stability amid ongoing global economic uncertainty and persistent trade threats from U.S. President Donald Trump.

The expansion, though slightly slower than the 5.3% recorded in the first quarter, matched expectations from an AFP survey. It came on the heels of a significant increase in exports for June, driven in part by businesses rushing to ship goods ahead of anticipated U.S. tariffs. Particularly noteworthy was the recovery in exports to the United States, reflecting the front-loading strategy of many firms bracing for new trade measures.

Industrial output in China exceeded expectations, further bolstering confidence. However, consumer activity remained sluggish. Retail sales rose by only 4.8% last month, missing Bloomberg’s projections and highlighting lingering caution among Chinese consumers.

According to Sarah Tan, an economist at Moody’s Analytics, “Recent efforts to boost spending, such as the broadening of the consumer goods trade-in scheme earlier this year, did temporarily lift retail sales. However, this support proved unsustainable, with funding reportedly drying up in several provinces. The scheme’s limitations highlight the need for policymakers to address the deeper structural challenges behind consumer caution.”

Despite recent efforts by Chinese authorities to stimulate domestic demand, the broader recovery continues to face headwinds, particularly from external pressures. A long-running trade war with the United States remains a critical factor, with many of the tariffs imposed by the Trump administration still in place. Although both sides agreed to a framework for a potential long-term trade deal during talks in London last month, tensions have flared again.

On Monday, President Trump escalated the situation by threatening to impose tariffs of up to 100% on all countries maintaining trade ties with Russia, including China, unless Moscow ends its war on Ukraine within 50 days. He also announced new antidumping duties on fresh tomato imports from Mexico and signalled that the European Union and Mexico could face 30% tariffs if trade negotiations are not concluded by August 1. Analysts, however, viewed the remarks as part of Trump’s typical hardline negotiation tactics and noted that similar threats in the past were later walked back.

Investor sentiment remained mostly upbeat despite the geopolitical backdrop. Major Asian stock markets responded positively, with Hong Kong rising over 1% and gains recorded in Tokyo, Sydney, Seoul, Singapore, Taipei, Wellington, Mumbai, and Jakarta. European markets also rallied, with London, Frankfurt, and Paris closing in positive territory. However, Shanghai and Manila posted declines.

U.S. futures received an additional boost after reports confirmed that tech giant Nvidia would resume sales of its H20 artificial intelligence chips to China. The move follows a decision by Washington to relax licensing restrictions, which had previously halted the exports. The development was welcomed by investors as a sign of thawing tensions in the tech sector, which has been a central battleground in U.S.-China trade disputes.

Lynn Song, chief economist for Greater China at ING, noted that while current growth puts China on track to meet its annual target, there is still a risk of slowing momentum in the second half of the year. “China remains on track to hit this year’s growth target, though a slowdown could be on the way,” Song said.

Meanwhile, cryptocurrency markets saw some volatility. Bitcoin, which reached a record high above $123,200 on Monday due to optimism around possible regulatory changes in the U.S., pulled back slightly as traders locked in profits.

While the latest figures from China offer a dose of reassurance, markets remain on edge. Ongoing trade disputes, election-year politics in the U.S., and consumer uncertainty in China are likely to influence investor decisions in the months to come.