China’s economy outpaced market forecasts as front-loaded orders and late-quarter shipments were swiftly dispatched before a series of global tariffs from Washington took effect. The world’s second-largest economy grew by 5.4 percent year-on-year during the three-month period ending in March, exceeding its own annual growth target of “around 5 percent” for the year.
According to Beijing’s National Bureau of Statistics, the economy grew 1.2 percent from the last quarter of 2024. In the first quarter of this year, exports soared by 6.9 percent year-on-year, bolstered by a 13.5 percent surge in March ahead of the April tariffs. Industrial production increased by 6.5 percent during the three-month period, while retail sales climbed 4.6 percent, partly fueled by trade-in programs that now cover a broader range of eligible products.
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Investments in fixed assets was up 4.2 percent, however, real estate investments dropped 9.9 percent. “The cratering property market remains front and centre of households’ concerns,” commented Sarah Tan, economist at Moody’s Analytics following the report, noting that along with a shaky labour market, housing prices are giving households good reasons to prioritise saving over spending.
Looking ahead
Despite the upbeat reading, Tan notes that China’s economic prospects for the remainder of the year appear muted as rising tensions with the US leads to weaker exports and investments. “That chaos will keep households nervous while any recovery in the property market will be uneven and shaky,” she wrote in a press note.
Analysts expect preemptive demand to slow going forward. Morgan Stanley lowered its China GDP forecast by 30 basis points to 4.2 percent this year, due in part to lingering tariffs and its secondary impact on domestic demand.
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Even after the exemption kicked in, the weighted average tariff on Asia has gone from 4.8 percent to 43. 8 percent, the US bank said in a separate note, adding that the path for sectoral tariffs remains unclear and likely to weigh on the business cycle.
The effective US tariffs on Chinese goods are now 145 percent, with China placing a 125 percent tariff on US imports. With both the US and China applying triple-digit tariff rates to each other’s goods, risks of a global recession are rising as the countries account for around 43 percent of the global economy, throwing stock markets into a tailspin.
