(Reuters) – China’s economy grew 5.4% year-on-year in the first quarter, data showed on Wednesday, surpassing estimates, but a trade war with the United States has cast a shadow over the outlook and raised pressure on Beijing to roll out further stimulus.
Analysts polled by Reuters had expected first-quarter gross domestic product (GDP) to expand 5.1% from a year earlier, slowing from 5.4% in the previous three months.
U.S. President Donald Trump has ratcheted up tariffs on Chinese goods, prompting Beijing to slap retaliatory duties on U.S. imports in an intensifying trade war between the world’s two biggest economies that markets fear will lead to a global recession.
KEY POINTS
* Q1 GDP +5.4% y/y (forecast +5.1%, Q4 +5.4%)
* Q1 GDP +1.2% q/q (forecast +1.4%)
* March industrial output +7.7% y/y (forecast 5.8%)
* March retail sales +5.9% y/y (forecast +4.2%)
* March fixed asset investment +4.2% y/y (forecast +4.1%)
* Jan-March property investment -9.9% y/y
MARKET REACTION:
Traders appeared to show scant response to China’s GDP data, with both indexes holding near pre-announcement levels. The blue-chip CSI300 Index fell 0.8%, while the Shanghai Composite Index eased 0.6%. COMMENTARY:
MATT SIMPSON, SENIOR MARKET ANALYST, CITY INDEX, BRISBANE
“While China’s growth figures would usually be bullish for sentiment, they have been overshadowed by Trump’s trade war – as the impact is yet to show up in the data. We also have a Powell speech looming that tends to dull volatility a tad.”
WOEI CHEN HO, ECONOMIST, UOB, SINGAPORE
“The data is very strong for March … and it was mainly because of manufacturers trying to get the orders out before the tariff.
“It’s hard to make a call on the growth prospects from here because you see a very strong fund loading that is supporting the first-quarter GDP. Retail sales are unlikely to be sustained, if we have all the negatives coming in and the property market is still in a gradual decline. Policy support will come in, but it’s unlikely to bring a turnaround.” BACKGROUND
* China has struggled to mount a strong and sustainable post-COVID economic rebound, burdened by a protracted property downturn, massive local government debt and weak private-sector spending.
* The world’s second-largest economy, which got off to a bumpy start this year, is facing one of its biggest challenges to its financial stability and growth as U.S. President Donald Trump ratchets up tariffs on its goods to eye-watering levels.
* Authorities have sharply ramped up policy stimulus since late September, but analysts believe much more is needed, and quickly, to keep the economy on an even keel in the face of Trump’s tariff shock. Longer-term structural challenges such as overcapacity, high debt levels and an ageing population are also in play.
* China has set an ambitious 2025 growth target of “around 5%”, though the spiralling trade war with the United States has already prompted many analysts to sharply downgrade their GDP forecasts for this year.
* Exports have remained a lone bright spot in China’s economy, with a trillion dollar trade surplus last year helping to underpin growth.
* Policymakers have repeatedly said the country has ample room and tools to bolster the economy and premier Li Qiang this month pledged to roll out more support measures.
(Reporting by Reuters Asia bureaus; Compiled and edited by Sherry Jacob-Phillips)
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