China’s economy grew 5.4% year-on-year in the first quarter of 2025, beating analysts’ projections and marking its fastest expansion in 18 months.
The stronger-than-expected performance comes as the country intensifies stimulus efforts in the face of mounting external pressures, including impending tariffs from the United States.
The GDP growth exceeded forecasts of 5.1%, signaling that Beijing’s economic support measures may be gaining traction. Additional data from March also came in above expectations, suggesting broad momentum across key sectors.
“With the continued implementation and effectiveness of various macroeconomic policies, the national economy has made a steady start and had a good beginning to the year,” stated China’s National Bureau of Statistics (NBS). Still, the agency cautioned about ongoing uncertainties: “The current external environment has become increasingly complex and challenging, while domestic effective demand lacks sufficient momentum. The foundation for the continued economic recovery and improvement still needs to be strengthened.”
Beijing has rolled out further fiscal support as trade tensions with the U.S. escalate. At its annual government meeting in January, China reaffirmed its 5% GDP growth target for 2025 and raised its budget deficit to 4% of GDP—its highest level in 30 years—signaling a “highly proactive” fiscal stance.
Industrial production surged by 7.7% year-on-year in March, outpacing the 5.9% forecast and posting its strongest gain since June 2021. Retail sales, a key barometer of consumer activity, rose 5.9%, well above expectations of 4.3%, and marked the fastest growth since December 2023.
Despite the upbeat data, China continues to struggle with weak domestic demand, partly due to persistent challenges in the property sector and the aftereffects of the COVID-19 pandemic. In response, authorities lowered the inflation target to 2% for 2024 and introduced measures such as consumer subsidies and initiatives to raise household income.
Fixed asset investment rose 4.2% in the first quarter, covering sectors such as manufacturing, infrastructure, and real estate. However, property investment alone declined 9.9%, reflecting ongoing vulnerabilities in the housing market. The unemployment rate showed slight improvement, easing to 5.2% in March from 5.4% in February.
With U.S. President Donald Trump proposing 145% tariffs on Chinese goods, China’s near-term outlook remains clouded by geopolitical uncertainty—even as early signs of economic recovery begin to emerge.
