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China’s economy grew by 5.4% in the first quarter of 2025, exceeding analysts’ expectations (5.1%), according to data released on Wednesday. This happened amid stronger consumer demand and robust industrial production, supported by government stimulus, Reuters reports.
However, there are bleak prospects ahead. US President Donald Trump has sharply increased duties on Chinese goods to 145%, to which Beijing has responded with mirror measures – duties on US products have risen to 125%. Analysts have already called this the most serious challenge to Chinese exports in decades.
“The tariff shock is unprecedented and will force China to seriously restructure its domestic economy,” said UBS, which lowered its forecast for China’s GDP growth in 2025 to 3.4%.
The economy grew by 1.2% in the quarter, down from 1.6% in the previous quarter. The main driver was retail sales, which grew by 5.9% in March. The industrial sector also gained momentum, with production growing by 7.7%.
However, real estate remains a weak link, with investment in the sector down by almost 10% and new house prices unchanged.
Beijing promises new support measures. Premier Li Keqiang has already promised additional stimulus, and the Politburo is expected to meet this month to determine economic strategy amid the threat of a global recession caused by the trade war between the world’s two largest economies.
“A strong and timely policy response is needed,” said Xu Tiancheng, senior economist at EIU, reminding that the second quarters of recent years have been weaker than the first for China.
Although the government has room for stimulus – and the budget deficit has been increased – Fitch Ratings has downgraded China’s sovereign rating, pointing to risks of excessive debt burden.
China’s focus this year is on stimulating consumption to compensate for losses from the export sector, which has been hit.
