China's unexpected Q1 growth amid looming global challenges
The Chinese economy exceeded analysts' expectations by achieving a GDP growth of 5.4 per cent year-on-year in the first quarter of 2025. This result surpasses both the "around 5 per cent" growth target set for the whole year and economists' forecasts, who expected growth at the level of 5.1 per cent.
On a quarterly basis, however, the Chinese economy experienced a slowdown — growth was 1.2 per cent compared to 1.6 per cent in the last quarter of 2024. Despite this, economic indicators for March turned out to be better than expected. Industrial production increased by 6.5 per cent, and retail sales by 4.6 per cent year-on-year.
The National Bureau of Statistics of China (NBS) assessed that the economy had a "good and steady start," maintaining a pace of recovery. At the same time, the institution warns of growing challenges in the global economic environment, which is becoming "more complex and severe." Sheng Laiyun, the deputy head of the NBS, admitted during a press briefing that "the imposition of high tariffs by the US will put certain pressures on our country's foreign trade and economy."
Trade war and its consequences
Economists point out that the good results in the first quarter may be the last positive highlight before the upcoming slowdown. Zhiwei Zhang, chief economist at Pinpoint Asset Management, is certain that the Chinese economy grew faster than expected in the first quarter.
He observed that the March data on activity accelerated in all areas, which matches the robust export data published earlier. At the same time, he warns that the effects of the trade war will only be visible in macroeconomic data in the coming months.
Zhang predicts severe consequences for the global economy. He argues that indicators suggest a sharp slowdown in exports in the region, whereas supply chains have been disrupted, likely creating a domino effect in many countries.
Experts observe that the 6.9 per cent growth in exports, particularly to the USA, resulted from businesses striving to fulfill orders before higher tariffs were introduced. In subsequent quarters, a decline in this indicator is most likely to be seen.
Challenges for the Chinese economy
Despite positive data for the first quarter, the Chinese economy is still grappling with serious structural challenges. The real estate sector remains the main problem — investments in real estate fell by 9.9 per cent in the first quarter, which continues to negatively impact the overall economic condition.
The current situation in international trade further complicates prospects. Import tariffs from China to the USA are currently at 145 per cent, while China has raised retaliatory tariffs on American goods to 125 per cent.
The Asian Development Bank forecasts a slowdown in China's economic growth to 4.7 per cent in 2025. Among the main reasons cited are higher American tariffs, low consumer confidence, and ongoing issues in the real estate sector.
Although the first quarter brought better-than-expected results, analysts remain cautious in their forecasts for the rest of the year, pointing to escalating international trade tensions as a key risk factor for the Chinese economy.
