Photo credit: www.cnbc.com
China’s Economy Sees Strong Q1 Growth Amid Trade Tensions
China’s economy recorded a surprising growth rate of 5.4% in the first quarter of the year, surpassing forecasts and maintaining robust momentum despite escalating trade tensions with the United States. This growth came as major investment banks adjusted their annual projections downward due to ongoing tariff threats.
The first-quarter GDP results exceeded expectations, as a Reuters poll had anticipated a growth rate of 5.1%. This improvement marks a continuation of a recovery trend that initiated in late 2024, largely fueled by comprehensive policy stimulus from the government.
In March, retail sales demonstrated significant strength, rising by 5.9% year on year and exceeding analysts’ predictions of 4.2%. Industrial production also showcased solid growth, expanding by 7.7% compared to the previous year, outpacing the median projection of 5.8%.
Furthermore, fixed-asset investment increased by 4.2% in the first quarter, aligning closely with the 4.1% growth anticipated in the Reuters poll.
Chinese leadership has established an ambitious growth target of approximately 5% for the year. However, achieving this goal appears challenging due to the potential for an intensifying trade conflict and persistently weak domestic consumption levels.
The ongoing tariff conflict with the U.S. has resulted in steep import duties, with total tariffs from U.S. President Donald Trump now reaching 145% on Chinese imports. In retaliation, Beijing has increased tariffs on U.S. goods to 125%. Such elevated levels of tariffs are expected to negatively impact China’s export sector and diminish the country’s economic growth this year.
A note from economists at Morgan Stanley indicated that “growth is likely to deteriorate rapidly from the second quarter” given the slim chances for immediate negotiations aimed at resolving the current tariff increases.
In response to the changing economic landscape, several investment banks have revised their forecasts for China’s growth. UBS Group, in particular, has released a stark prediction, estimating that China’s economy will expand by only 3.4% this year, largely influenced by the constraints imposed by U.S. tariffs. The bank forecasts a significant decline in Chinese exports to the U.S., projecting a reduction of two-thirds in the upcoming quarters, leading to an overall export decline of 10% in dollar terms for the year.
There is mounting pressure on Chinese officials to introduce more effective stimulus measures to bolster domestic consumption and support the housing market, while simultaneously aiming to lessen the economy’s dependence on exports and investment.
This is breaking news. Please refresh for updates.
Source
www.cnbc.com