Macroeconomics

China’s firm GDP bolsters Beijing

16 April 2025 • 4 mins read

Vendors work at vegetable stalls at a market in Beijing. AFP.

China’s growth beat expectations in 1Q25. GDP expanded 5.4% year-on-year (YoY) for the second quarter in a row, exceeding Beijing’s 5% annual growth target. In 1Q25, GDP rose by a firm 1.2% quarter-on-quarter (QoQ) from 4Q24.
The data shows China’s plans to help growth after its weak recovery from the pandemic are gaining traction. Fiscal stimulus boosted infrastructure investment and trade-in schemes aided car sales.
But from 2Q25 onwards, GDP growth is set to slow sharply each quarter to rates of 4.0% YoY or less as extreme US tariffs curb China’s exports this year.
We expect full year growth to slow to 4.2% in 2025 from 5.0% in 2024. But the 1Q25 GDP data will give officials confidence China can weather a tough stand-off with the US over the next few months.

China’s growth beat expectations in 1Q25. GDP expanded 5.4% YoY for the second quarter in a row, exceeding Beijing’s 5% annual growth target. In 1Q25, GDP rose by a firm 1.2% QoQ compared to 4Q24.

Source: Bank of Singapore, Bloomberg

1Q25 GDP and March’s activity data shows Beijing’s plans to boost growth after China’s weak recovery from the pandemic are gaining traction.

First, the front-loading of fiscal stimulus approved by the National People’s Congress in early March spurred infrastructure investment to expand 5.8% YoY last month as the chart above shows. Manufacturing investment also continued to grow strongly by 9.1% YoY in March.

Source: Bank of Singapore, Bloomberg

Second, the government’s trade-in schemes to support consumption strengthened car sales. March’s retail sales rose 5.9% YoY as the chart above shows. Third, industrial production also beat forecasts, expanding 7.7% in March as exporters front-loaded shipments ahead of US tariff hikes.

Source: Bank of Singapore, Bloomberg

From 2Q25, however, growth is set to slow sharply each quarter to rates of 4.0% YoY or less. We expect US tariffs will cut China’s full-year GDP growth to 4.2% in 2025 from 5.0% in 2024. At the same time, China continues to face deflation as the last chart shows making further interest rate cuts and fiscal stimulus urgent this year. But the 1Q25 data will give officials confidence China can weather a prolonged stand-off with the US over the next few months.

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Author:

Mansoor Mohi-uddin

Bank of Singapore