China’s gross domestic product (GDP) in the first quarter of the current year showed an increase of 5.4% compared to the figure recorded for the same period in 2024, according to data published on Wednesday, April 16, by the National Bureau of Statistics of the Asian country.
The mentioned result indicates that the Chinese economy, which is currently the second-largest in the world, maintains a high dynamic despite internal problems and external adverse circumstances. For the prospects of further upward trajectory of the Asian country’s GDP, the most significant threat is the tariffs imposed by the United States on goods imported from China. It is worth noting that Beijing has already announced retaliatory measures. At the same time, the tariff threat remains a source of significant risks to the growth prospects of the world’s second-largest economy. Against the background of a high level of intensity of the relevant factor, many major investment banks have revised down their forecasts for an increase in the Asian country’s GDP in 2025.
The growth of the Chinese economy in the first quarter of the current year exceeded preliminary forecasts. The consensus projection of experts interviewed by the media predicted that the mentioned indicator would increase by 5.1% over the specified period. The factor impacting this forecast was the gradual recovery of the Chinese economy, which began in the second half of 2024 against the background of large-scale measures implemented by Beijing to stimulate the relevant process. At the same time, many experts argue that the authorities of the Asian country will most likely have to expand the mentioned measures since the challenges are significant. In addition to external negative circumstances, the Chinese economic system is facing internal difficulties, including a protracted crisis in the real estate sector, sluggish consumer activity, and falling confidence from investors, primarily foreign ones.
Retail sales in the Asian country showed an increase of 5.9% in March compared to the same period in 2024. The consensus forecast of analysts surveyed by the media predicted that the mentioned reading would rise by 4.2% over the specified period.
Industrial output in the Asian country grew by 7.7% year-on-year last month. At the same time, the consensus forecast of analysts surveyed by the media predicted that the mentioned indicator would increase by 5.8%.
Fixed asset investments in the Asian country grew by 4.2% year-on-year in the first quarter of the current year. The consensus forecast of analysts polled by the media called for an increase in this indicator by 4.1%. However, it is worth noting that real estate-related fixed asset investments in the Asian country fell by 9.9% for the year as of March. This dynamic was recorded against the background of the growth of infrastructure and manufacturing investments.
The urban unemployment rate in March in China was recorded at the 5.2% mark. It is worth noting that in February this figure was 5.4%, which is a two-year high.
The National Bureau of Statistics of China described the current condition of the world’s second-largest economy as off to a good and steady start and separately underlined that innovation is playing an increasingly leading role. In this context, it is worth noting that in 2025, the Chinese technology sector has already demonstrated results that demonstrate its ability to fully compete with similar functional spaces in other countries. In January, a local startup DeepSeek announced a breakthrough in the area of artificial intelligence. This startup has launched the R1 machine intelligence model. The mentioned virtual product can compete with OpenAI’s GPT-4o in terms of efficiency and performance. It is also noteworthy that $6 million was spent on training R1. This figure is obviously much less than the $100 million that OpenAI spent on GPT-4 training in 2023. Also, R1 requires ten times less computing power than other advanced artificial intelligence models. DeepSeek has demonstrated to the whole world that the development of AI models can be much less expensive than the average statistical indicators typical for the industry.
The National Bureau of Statistics of China, despite a positive assessment of the current condition of the world’s second-largest economy, warned that the external environment is becoming more complex and severe. Also, in this context, it was separately noted that domestic demand remains insufficient. In a release published by the mentioned bureau, it was underlined that Beijing should implement more proactive and effective macro policies. The need to expand and strengthen the domestic economy and actively respond to the uncertainties of the external environment was also noted.
The Chinese authorities have set an ambitious economic growth target of about 5% for 2025. From the point of view of what can be called the formal perception of information, the data on the dynamic of the Asian country’s GDP for the first quarter of the current year may be seen as convincing evidence that Beijing is on a sustainable path to achieving the mentioned goal. However, such statements do not take into account a more complex context. It is worth noting that in the first quarter of 2025, the maximum US tariffs against China have not yet been announced, and even more so, these measures have not generated consequences in the practical plane. The tariff confrontation between Beijing and Washington began during the first three months of the current year, but this process reached its peak escalation in April, which, for objective reasons, cannot be reflected in the data on the Asian country’s GDP for January-March. As part of the trade war, China is actually the main target for the United States. For an Asian country which economy relies heavily on exports, appropriate external measures will definitely have negative consequences, but it is not yet known exactly what scale of impact these ramifications Beijing will face. Also, China still has not overcome the problem of sluggish domestic demand, which will inevitably affect the dynamic of GDP in a negative way. Against the background of the deteriorating foreign trade situation, Beijing’s need to scale up measures to stimulate domestic economic activity is obvious. In this context, it is also worth noting that global uncertainty, one of the main factors of which is the trade war, is a source of pressure on consumer sentiment. The lack of even a preliminary understanding of the prospects of what will happen in the foreseeable future forces people to adhere to a moderate approach to spending.
Currently, 145% of US tariffs apply to China. These trade measures relate to the import of goods from an Asian country to the United States. Beijing retaliated by raising its levies on US imports to 125% and imposing several export restrictions.
Tianchen Xu, senior economist at the Economic Intelligence Unit, stated that China’s strong GDP growth in the first quarter of 2025 indicates that the stimulus has been very effective in boosting consumption and supporting investment. At the same time, the expert noted that for an Asian country, the publication of strong economic data at the beginning of the year is a characteristic feature. Tianchen Xu stated that the trade war 2.0, in which China and the United States are effectively imposing embargos against each other, will have a sizeable impact on the Chinese export sector, and capital expenditures will slow as a result.
Data from the National Bureau of Statistics of China shows that last year the share of the Asian country’s exports to the United States fell to 14.7%. In 2018, the corresponding figure was recorded at the 19.2% mark. These data indicate that since the trade war that was observed during the first presidential term of Donald Trump, who returned to the White House in January 2025, China has been able to achieve certain results in a kind of diversification of its foreign economic activities outside of cooperation with the United States.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, noted that despite the upbeat monthly data in March, the damage from the trade war will show up in the macro data for April. The expert also drew attention to the fact that high-frequency indicators suggest exports have slowed sharply in the region.
A team of economists at Morgan Stanley said in a note released this week that China’s economic growth is likely to be rapidly deteriorating from the second quarter, given the low likelihood of bilateral negotiations to establish an offramp for the 125% tariff hike.
According to media reports, the prevailing opinion among experts at major investment banks is that Beijing will not be able to achieve its goal of GDP growth for 2025. In this case, the main obstacle to achieving the desired result for China is the very high increase in US tariffs on goods imported from an Asian country.
Last Tuesday, April 15, UBS Group published an updated forecast for China’s GDP growth in the current year, which is characterized by a particularly high level of pessimism compared to the projections of other banks. Experts at the mentioned financial institution expect the world’s second-largest economy to increase by 3.4% in 2025. They explained their forecast by saying that US tariffs choke Chinese exports. UBS also predicts that shipments of products from the Asian country to the United States will fall by two-thirds in the coming quarters. Moreover, the experts of this financial institution expect that the total volume of Chinese exports will decrease by 10% in the dollar term in 2025.
ANZ also released a downward revised forecast for the Asian country’s GDP growth this year. Experts of the financial institution expect that the Chinese economy will rise by 4.2% in the current year. The previous version of the projection provided for the growth of the Asian country’s GDP by 4.8%.
Nomura also revised down its forecast for the rise of the world’s second-largest economy in 2025. The updated projection provides for the growth of the Asian country’s GDP by 4% in the current year. Nomura’s previous forecast contained an expectation of a 4.5% rise in the Chinese economy in 2025. The International Monetary Fund and the Asian Development Bank forecast approximately about 4.6% growth of the mentioned indicator in the current year.
Also this month, Fitch downgraded the Asian country’s sovereign credit rating. In this case, the rapidly growing government debt and the risks to public finances were mentioned. Fitch underlined that the mentioned factors indicate a tricky balancing act for policymakers seeking to expand consumption to guard against a trade downturn.
According to media reports, expectations are growing among experts that Beijing, against the background of external challenges, will take more forceful stimulating measures to bolster domestic consumption and the housing market to counter potential trade disruption.
Lisheng Wang, China economist at Goldman Sachs said in a note published on Wednesday that the urgency of further easing the Asian country’s monetary policy is increasing, and fiscal expansion is likely to do most of the heavy lifting to stabilize GDP growth, though this should be still insufficient to fully offset the severe external shocks.
Robin Xing, Morgan Stanley’s chief China economist, expects Beijing to begin easing monetary policy in the second quarter of 2025. According to the expert, the reserve requirement ratio will be cut by 50 basis points. Robin Xing also expects that the People’s Bank of China will lower the cost of borrowing by 15 basis points. Moreover, the expert said that Beijing is likely to accelerate the issuance and deployment of local construction bonds and ramp up the consumer goods trade-in program with broader coverage or more generous subsidies, and a push for local governments to destock housing inventory. Besides, Robin Xing expects China to unveil an additional fiscal stimulus of 1 trillion yuan to 1.5 trillion yuan ($136.5 billion to $204.7 billion) in the second half of 2025. According to the expert, this will allow the Asian country to partially offset the tariff shock.
Chinese National Bureau of Statistics Deputy Commissioner Sheng Laiyun, during a speech at a media briefing, after the Asian country’s GDP data for the first quarter of 2025 was published, warned that global protectionism was on the rise and that the Asian country should work harder for its economic recovery. It was also noted that Beijing has decades of experience in responding to various crises, including, for example, the coronavirus pandemic and previous tensions with Washington. Sheng Laiyun noted that US tariffs will put pressure on trade, but China’s economy will remain resilient.
Nomura economists said in a note that the Asian country is facing two material drags at once, including the ongoing domestic drop in property prices and an unprecedented trade war with the United States externally.
Returning to the topic of the importance of exports for the world’s second-largest economy, it is worth noting that last year Beijing recorded a trade surplus of $1 trillion. This indicator allowed China to support GDP growth in 2024 even in the face of a prolonged slump in the real estate sector and sluggish domestic consumption, which undercuts a solid economic recovery. This week, the Prime Minister of the Asian country, Li Qiang, said that exporters will have to cope with profoundly external changes, and vowed to support more domestic consumption.
The media noted that investors mostly did not react to China’s GDP data for the first quarter of 2025, which turned out to be better than preliminary expectations. Chinese benchmark Shanghai Composite Index ended a wobbly session with a moderate increase. At the same time, the yuan fell as confidence remains weak amid deteriorating growth prospects for the world’s second-largest economy.
Against the background of the ongoing escalation in the context of relationships with Washington, Beijing is demonstrating its desire to develop and strengthen economic ties with other world capitals. Currently, China, as noted by the media, pays special attention to its reputation in the geopolitical space. Beijing is likely to promote the narrative that the Asian country is a territory of stability and confidence during a period of high global turbulence. At the level of official rhetoric, China has consistently positioned itself as a defender of free trade and economic cooperation based on the principle of respecting the interests of all parties to the interaction. Beijing can offer other capitals a large-scale market and powerful and competitive production facilities. Some countries will be interested in such a potential proposal since objective benefits are implied in this case. However, several capitals will probably prefer to refrain from interacting with Beijing, fearing restrictive measures from Washington.
This week, the President of the People’s Republic of China Xi Jinping is paying visits to some Asian countries. In this case, the goal is to strengthen regional economic cooperation as a factor of offset shocks related to the trade war. Xi Jinping will visit Vietnam, Cambodia, and Malaysia. At the same time, the US announced that a senior State Department official, Sean O’Neill, would be traveling this week to Vietnam’s capital Hanoi, and to Ho Chi Minh City, Cambodia’s Siem Reap, and Japan’s capital Tokyo.
China demonstrates that its foreign trade activities are not characterized by what can be described as a critical focus on cooperation with the United States. At China’s Canton trade fair, in Guangzhou, exporters were emphatic about the need to look beyond selling to Americans. Wallace Huang, the export business director of Guangdong Weking Group, which makes rice cookers, said that the Asian country needs to diversify its market. It was also noted in this context that when the West is dark, the East is bright.
In March, Chinese exports showed growth of more than 12% compared to the same period in 2024. For the entire first quarter of 2025, this reading rose by almost 6% year-on-year.
Consumer prices in the Asian country in January-March of the current year fell by 0.1% compared with the indicator for the same period in 2024.
Beijing is currently facing virtually historic challenges. The tariff shock will definitely have a sensitive and painful impact on the world’s second-largest economy, but China still has a significant margin of safety. A decrease in indicators is more than likely in this case. Pessimistic forecasts suggest that Chinese GDP growth will continue, although the pace of the corresponding process will decrease and will most likely be insufficient for a full-fledged recovery of the world’s second-largest economy. However, the mentioned projected rates are still higher than the global average. For example, the International Monetary Fund expects the global average economic growth rate to reach 3.3% in 2025. Beijing will not be able to fully avoid the deterioration of the economic situation. What is currently important is the extent to which China can minimize the impact of negative factors.
As we have reported earlier, Rare Earths Become China’s Weapon in Trade War.
