China’s economy outpaced expectations by growing 5.4% year-on-year in the first quarter, according to data released on Wednesday. However, the escalating trade tensions with the United States are casting a shadow on the economic outlook, increasing the pressure on Beijing to implement further stimulus measures.
Analysts, surveyed by Reuters, had forecasted a 5.1% expansion in the first quarter GDP, a slowdown from the 5.4% growth seen in the final quarter of 2024. Beijing’s target of achieving approximately 5% economic growth for the year is regarded as ambitious due to challenges such as a prolonged property market decline, weak domestic demand, and the impact of U.S. President Donald Trump’s substantial tariffs on Chinese products.
In the period from January to March, GDP rose by 1.2% quarter-on-quarter, falling short of the expected 1.4% increase and a decrease from the 1.6% growth in the previous quarter. Chinese authorities have assured that there is significant policy flexibility to support economic expansion and have committed to reducing interest rates and adjusting the reserve requirement ratio when appropriate.
Prior to the official announcement of first quarter figures, a Reuters poll anticipates China’s economy for 2025 to grow by a modest 4.5% compared to the previous year’s 5.0%, not meeting the Chinese official target of approximately 5.0%. UBS has revised its 2025 growth projection for China downward to 3.4% from 4%, assuming that the tariff hikes between China and the U.S. persist and Beijing implements further economic stimulus measures.
