CFP
TMTPOST -- China's economy grew at an annual rate of 5.4% in the January-March period, according to data released by the government on Wednesday.
This is driven largely by strong exports ahead of U.S. President Donald Trump's swift tariff hikes on Chinese goods.
Economists expect the world's second-largest economy to decelerate sharply in the coming months, as U.S. tariffs of up to 245% on Chinese imports come into effect.
In response, Beijing has imposed 125% tariffs on American products while reaffirming its commitment to keeping Chinese markets open to trade and investments.
Exports were instrumental in enabling China to achieve 5% growth in 2024, and the official full-year growth target remains around that level.
While the near-term impact of tariffs is expected to weigh on growth, they are unlikely to derail China's long-term prospects, said Sheng Laiyun, the spokesperson for the National Bureau of Statistics (NBS).
China's economic foundation remains solid, resilient, and full of potential. China has both the confidence and capacity to manage external risks and meet the development objectives, Sheng told reporters.
On a quarterly basis, China's GDP grew by 1.2% in January-March, down from 1.6% in the final quarter of 2024.
Chinese exports surged over 12% year-on-year in March and nearly 6% in U.S. dollar terms in Q1, as firms rushed shipments ahead of the tariff hikes. This has supported strong manufacturing momentum in recent months.
This surge was front-loaded—driven by an export rush and inventory build-up in the U.S. before tariffs hit, Stephen Innes of SPI Asset Management wrote in a note.
Industrial production climbed 6.5% from a year earlier, buoyed by an 11% gain in equipment manufacturing.
High-tech sectors saw the fastest growth, with battery electric and hybrid vehicle output soaring 45.4% year-on-year. Production of 3D printers rose nearly 45%, and industrial robot output was up 26%.
However, despite growth exceeding global norms, China's economy is still grappling with post-pandemic sluggishness, weighed down by a property sector downturn following a clampdown on excessive borrowing by developers.
Consumer prices dropped 0.1% in Q1, signaling soft demand relative to supply across several industries. Real estate investment stayed weak, declining nearly 10% year-on-year, even as Beijing pushed for more lending to support home purchases.
The tariff standoff is hitting just as China tries to spur business investment, boost employment, and revive consumer confidence.
Retail sales rose 4.2% year-on-year. Nonetheless, both official and private analysts remain wary, citing the unpredictability of Trump's evolving trade positions.
Recent developments make it very difficult to forecast how the U.S.-China tariff standoff will unfold, UBS economists led by Tao Wang said in a research note.
The IMF and Asian Development Bank continue to project China's 2024 growth at about 4.6%.
Trump initially raised tariffs on Chinese imports by 10%, then increased the rate to 20%, and has now imposed new 245% tariffs on the bulk of Chinese shipments to the U.S.
UBS estimates that if tariffs remain at current levels, China's U.S.-bound exports could drop by two-thirds and global exports may fall 10% in dollar terms. It has revised its 2024 growth forecast to 3.4% from 4% and expects a further slowdown to 3% by 2026.
Over the past seven months, Beijing has intensified efforts to boost consumption and private investment, expanding subsidies for trade-ins of autos and appliances and directing more financial support to the struggling housing market and other key sectors.
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