• China's Q1 2025 GDP growth of 5.4% year-on-year outperforms market forecasts.
  • Export growth surges 6.9% in yuan terms, with March seeing a 13.5% jump.
  • Government stimulus measures and revised growth targets signal confidence in economic resilience.

Strong Economic Indicators Defy Negative Characterization

China's economy has demonstrated unexpected strength in the first quarter of 2025, with GDP expanding 5.4% year-on-year to reach RMB 31.88 trillion (US$4.40 trillion). This performance exceeded both the 5.1% growth forecast in Caixin's economist survey and Reuters poll estimates, contradicting recent claims about the country's economic performance.

Foreign trade has been a particular bright spot, with exports growing 6.9% year-on-year in yuan terms during Q1. The month of March alone saw an impressive 13.5% jump in exports, though some analysts caution this may reflect a "pre-tariff rush" ahead of announced US tariff increases.

Sector-Specific Challenges Persist

While the overall picture appears robust, the real estate sector continues to drag on growth. Real estate investment fell nearly 10% in early 2025, and while price declines are slowing, the market has yet to fully stabilize. "The property sector remains our biggest concern," said one analyst at a European investment bank who asked not to be named due to company policy.

Trade tensions with the US also loom large, with escalating tariffs potentially impacting global trade flows. However, government officials point to emerging high-end manufacturing as a new growth engine that could help offset these challenges.

Policy Response and Outlook

The Chinese government has taken several steps to support continued growth, including expanding its fiscal deficit budget to 4% from the previous 3% limit during March's "two sessions." This more aggressive fiscal stance accompanies a 2025 growth target of around 5%, which many analysts now see as achievable.

Financial institutions have begun revising their forecasts upward. BBVA Research raised its 2025 GDP forecast to 4.5% from 4.1%, while Deloitte projects growth around 4%. "What we're seeing is an economy that's proving more resilient than many expected," noted a senior economist at a major Asian bank.

Correction: An earlier version of this article misstated the percentage increase in exports for March 2025. The correct figure is 13.5%.