Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
China’s Q1 GDP grew by 5.4% year-on-year in 2025, according to official data from the National Bureau of Statistics. That’s faster than expected — and matches the growth seen in the final quarter of 2024.
The GDP figure, totaling 31.88 trillion yuan, beat the 5.2% estimate from economists surveyed by Reuters.
Takeaway: China kicked off the year with stronger-than-expected growth — but that’s only part of the story.
What’s Driving the Numbers?
- Industrial output surged 7.7% in March — the fastest since mid-2021.
- Retail sales jumped 5.9%, boosted by government stimulus and a rush to export goods before U.S. tariffs kicked in.
- Fixed-asset investment rose 4.2% overall, though real estate dragged down the average.
- Exports surged as manufacturers rushed to fill overseas orders.
This momentum came largely from stimulus efforts — including interest rate cuts and a 12 trillion yuan debt swap plan launched in late 2024.
Takeaway: Stimulus and export demand fueled a big Q1 — but much of that demand was pulled forward.
The Warning Signs
Despite the Q1 strength, trouble is on the horizon:
- Deflation remains a persistent risk.
- Consumer confidence is weak and spending remains fragile.
- Real estate investment dropped 9.9%, highlighting deep cracks in the property sector.
- New U.S. tariffs — up to 145% — went into effect in April, threatening the export engine that helped drive Q1 gains.
UBS has already slashed its full-year GDP forecast for China to 3.4%, citing the tariff impact.
Takeaway: The upbeat start may not last — growth is expected to slow sharply in the coming quarters.
Labor Market and What’s Next
March’s urban unemployment rate fell slightly to 5.2%, down from 5.4% in February. But analysts say the labor market still feels fragile — especially in youth employment and construction.
Chinese policymakers are widely expected to roll out additional stimulus measures in the months ahead to support domestic demand and counter tariff shocks.
Takeaway: Beijing may need to open the taps again to keep the economy afloat as external pressure mounts.
Big Picture
China’s 5.4% Q1 GDP growth signals solid momentum, driven by manufacturing strength, export demand, and policy support. While it exceeded expectations, economists caution that underlying challenges remain — including deflationary pressure, a weak property market, and fragile consumer confidence.
The outlook for the rest of 2025 will depend on how effectively Beijing navigates internal headwinds and adapts to shifting global trade dynamics, including newly imposed tariffs abroad.
Takeaway: A strong first quarter shows China still has levers to drive growth — but sustaining it will take careful policy moves.
