China's economic resilience tested amid looming US tariffs

According to a survey conducted by Bloomberg among economists, China's industrial production and overall investments likely maintained a stable pace. Official data to be published on Wednesday is expected to show an increase in retail sales in March, thanks to government subsidies.

In a report released on Saturday, Morgan Stanley economists, including Robin Xing, predicted that economic growth is expected to decline significantly starting in the second quarter, due to the slim chances of swift bilateral talks resolving the tariff dispute.

So far, Chinese authorities have assured that they have sufficient space and tools to deal with the impending tariff shock. However, they have not disclosed the specific measures they plan to take. Thus, there is a growing expectation that China's central bank will soon lower interest rates or the reserve requirement ratio, which would free up funds for banks for loans and investments.

However, there is a risk that significant political support may come later, only when economic data clearly points to a slowdown or when markets experience a downturn. This would mean that Beijing may decide on additional economic stimulus only in the latter half of the year.

What do economists' estimates say? China's GDP likely grew by 5.2% in the first three months compared to the previous year. This would mean a continuation of the recovery that began at the end of 2024, thanks to a broad stimulus programme. Although this is a slightly slower pace than the 5.4% growth in the last three months of last year, it still represents a solid result, considering the challenges related to the real estate market collapse and weak consumer sentiment.

Retail sales are forecast to have increased by 4.3% in March compared to the previous year. Although still growing slower than before the pandemic, this would also be the fastest pace since October. China announced that it would stimulate the consumer market with a 38,4€ billion programme to facilitate the purchase of consumer goods—from smartphones to televisions and household appliances.

Industrial production, equally significant for GDP, likely maintained a stable growth rate of 5.9% in March. This is the same as in the January-February period and similar to the expansion observed throughout 2024. However, this strong result is—like in the case of European economies—a result of exporters' hasty actions. They accelerated sales to avoid tariffs. This is the main reason for China's export growth in March—by 12% compared to the previous year. The growth is likely to weaken in April, most probably due to tariffs imposed by the USA.

Investments in fixed assets in China also likely continued to grow at a rate of 4.1% in the first three months, corresponding to the growth in January and February and marking a rebound compared to 2024. The government accelerated bond sales this year, providing earlier financing support for infrastructure projects. This likely led to a sharp increase in excavator sales in March.

Economists at Citigroup, including Ji Xinyu, noted in a Monday report that while the supply side of the domestic economy seemed to hold up in April, the real estate market dynamics weakened. "Political efforts may be needed to stabilise the economy and balance the impact of tariffs," the bank's experts wrote.