China's economy posted stronger-than-expected growth in the first quarter of 2025, offering a temporary boost before the full impact of newly imposed US tariffs begins to bite. According to data released Wednesday by the National Bureau of Statistics (NBS), gross domestic product rose 5.4% year-on-year in the first three months—above the 5.2% consensus forecast from economists surveyed by Bloomberg.
But the celebratory tone is already fading. The data reflects conditions before April, when US President Donald Trump dramatically raised tariffs on Chinese imports, triggering retaliation from Beijing. With levies now as high as 145%, economists warn that China’s growth engine—exports—may stall, increasing pressure on policymakers to step in with stimulus.
1. GDP growth surpasses expectations
China’s economy expanded 5.4% in the first quarter compared to the same period a year ago. That performance exceeded both Bloomberg and Reuters forecasts and matched Q4’s pace. However, analysts say this resilience was largely front-loaded. "Before the tariff storms hit, China's GDP growth likely eased but remained solid, thanks to the recovery in domestic demand," Societe Generale analysts noted.
2. Industrial output shows strongest growth since 2021
March industrial production rose 7.7% year-on-year, the fastest since June 2021. The surge is attributed to factories racing to fulfill overseas orders ahead of tariff hikes. “Industrial production was a beat but understandable after the strong export data. But that’s all in the past now,” said Michelle Lam, Greater China economist at Societe Generale.
3. Retail sales jump on stimulus support
Retail sales climbed 5.9% in March, the best showing since December 2023 and well above expectations. “The most pleasant surprise is retail sales which shows that consumption subsidies are working,” Lam added. However, weak labor market confidence continues to constrain spending potential, especially as trade tensions weigh on job stability.
4. Fixed-asset investment rises, property sector declines
Fixed-asset investment rose 4.2% in the first quarter, showing steady growth in infrastructure and manufacturing. But property investment fell sharply by 9.9%, reflecting ongoing distress in China’s real estate sector. The prolonged slump in housing continues to drag on broader economic momentum.
5. Unemployment rate drops slightly
China’s urban jobless rate fell to 5.2% in March from 5.4% in February. While the drop signals some improvement, analysts say the job market remains fragile and could deteriorate as export-oriented industries face shrinking orders.
6. Policymakers signal more stimulus ahead
The NBS acknowledged the mounting risks in its statement: “The external environment is becoming more complex and severe... and the foundation for sustained economic recovery and growth is yet to be consolidated.” Economists expect rate cuts, lower bank reserve requirements, and trillions in fiscal stimulus in the coming months.
7. Tariffs cast shadow over growth outlook
The upbeat Q1 figures mask what analysts expect to be a sharp slowdown in the months ahead. Trump’s new tariff package lifted duties on most Chinese goods to 145%, triggering tit-for-tat retaliation by Beijing. “We think the tariff shock poses unprecedented challenges to China’s exports,” UBS analysts wrote in a recent downgrade of their growth forecast.
8. Export rush in March likely to reverse
March's export surge was seen as a temporary spike, driven by firms rushing to ship goods before tariffs hit. With levies now active, April and May are likely to show a sharp pullback. “Trade activities have likely slowed rapidly this month as global companies paused orders and reduced production,” analysts warned.
9. Economists downgrade 2025 growth forecasts
UBS cut its 2025 growth forecast for China to 3.4% from 4%, while Goldman Sachs and Citigroup have also issued downward revisions. Without major stimulus, Beijing could miss its 5% growth target for the year. The tariff shock has amplified pre-existing weaknesses, including sluggish demand and rising debt.
10. Markets and Yuan largely unmoved by data
Despite the better-than-expected data, Chinese stocks remained under pressure. The Hang Seng China Enterprises Index fell as much as 2.4%, while the CSI 300 dropped 0.8%. The yuan held steady at 7.3236 in offshore trading, reflecting muted investor optimism amid geopolitical tensions and economic uncertainty.
(With inputs from agencies)
But the celebratory tone is already fading. The data reflects conditions before April, when US President Donald Trump dramatically raised tariffs on Chinese imports, triggering retaliation from Beijing. With levies now as high as 145%, economists warn that China’s growth engine—exports—may stall, increasing pressure on policymakers to step in with stimulus.
1. GDP growth surpasses expectations
China’s economy expanded 5.4% in the first quarter compared to the same period a year ago. That performance exceeded both Bloomberg and Reuters forecasts and matched Q4’s pace. However, analysts say this resilience was largely front-loaded. "Before the tariff storms hit, China's GDP growth likely eased but remained solid, thanks to the recovery in domestic demand," Societe Generale analysts noted.
2. Industrial output shows strongest growth since 2021
March industrial production rose 7.7% year-on-year, the fastest since June 2021. The surge is attributed to factories racing to fulfill overseas orders ahead of tariff hikes. “Industrial production was a beat but understandable after the strong export data. But that’s all in the past now,” said Michelle Lam, Greater China economist at Societe Generale.
3. Retail sales jump on stimulus support
Retail sales climbed 5.9% in March, the best showing since December 2023 and well above expectations. “The most pleasant surprise is retail sales which shows that consumption subsidies are working,” Lam added. However, weak labor market confidence continues to constrain spending potential, especially as trade tensions weigh on job stability.
4. Fixed-asset investment rises, property sector declines
Fixed-asset investment rose 4.2% in the first quarter, showing steady growth in infrastructure and manufacturing. But property investment fell sharply by 9.9%, reflecting ongoing distress in China’s real estate sector. The prolonged slump in housing continues to drag on broader economic momentum.
5. Unemployment rate drops slightly
China’s urban jobless rate fell to 5.2% in March from 5.4% in February. While the drop signals some improvement, analysts say the job market remains fragile and could deteriorate as export-oriented industries face shrinking orders.
6. Policymakers signal more stimulus ahead
The NBS acknowledged the mounting risks in its statement: “The external environment is becoming more complex and severe... and the foundation for sustained economic recovery and growth is yet to be consolidated.” Economists expect rate cuts, lower bank reserve requirements, and trillions in fiscal stimulus in the coming months.
7. Tariffs cast shadow over growth outlook
The upbeat Q1 figures mask what analysts expect to be a sharp slowdown in the months ahead. Trump’s new tariff package lifted duties on most Chinese goods to 145%, triggering tit-for-tat retaliation by Beijing. “We think the tariff shock poses unprecedented challenges to China’s exports,” UBS analysts wrote in a recent downgrade of their growth forecast.
8. Export rush in March likely to reverse
March's export surge was seen as a temporary spike, driven by firms rushing to ship goods before tariffs hit. With levies now active, April and May are likely to show a sharp pullback. “Trade activities have likely slowed rapidly this month as global companies paused orders and reduced production,” analysts warned.
9. Economists downgrade 2025 growth forecasts
UBS cut its 2025 growth forecast for China to 3.4% from 4%, while Goldman Sachs and Citigroup have also issued downward revisions. Without major stimulus, Beijing could miss its 5% growth target for the year. The tariff shock has amplified pre-existing weaknesses, including sluggish demand and rising debt.
10. Markets and Yuan largely unmoved by data
Despite the better-than-expected data, Chinese stocks remained under pressure. The Hang Seng China Enterprises Index fell as much as 2.4%, while the CSI 300 dropped 0.8%. The yuan held steady at 7.3236 in offshore trading, reflecting muted investor optimism amid geopolitical tensions and economic uncertainty.
(With inputs from agencies)
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