China's 5.4% Q1 growth beats forecasts, analysts see resilient demand

China's economy grew faster than expected in the first quarter of 2025, with GDP expanding by 5.4 percent year on year, buoyed by strong retail sales, industrial output and government measures.

The upbeat data drew positive reactions from international economists, though some cautioned that trade tensions and external pressures could weigh on future growth.

Strong consumption and policy support drive growth

Retail sales surged 5.9 percent in March, the fastest pace in over a year and well above the 4.3 percent forecast. Industrial production also jumped 7.7 percent, signaling robust factory activity.

Huang Zichun, an economist at Capital Economics, wrote in a research note cited by CNN that China is likely to roll out further measures to sustain domestic demand. "Policy support should continue to shore up domestic demand over the coming months," she said, pointing to expanded fiscal spending and potential monetary easing.

Xu Tianchen, senior economist at the Economist Intelligence Unit, told Channel News Asia that the first-quarter performance marked "a very good start," crediting government measures for boosting consumption and investment.

Investment and industrial recovery underway

Fixed-asset investment, excluding property, showed signs of recovery, aligning with double-digit growth in excavator sales and usage, said Xing Zhaopeng, senior China strategist at ANZ, in comments to Reuters.

"The data looks encouraging, as growth may help close the output gap," he said, adding that strong domestic and external demand reduced the urgency for immediate monetary easing.

Chen Fengying, a research fellow at the China Institutes of Contemporary International Relations, told Global Times that technological innovation, private sector confidence and foreign trade resilience were key growth drivers.

Future stimulus?

Despite the positive indicators, analysts remain cautious about trade headwinds. Ryota Abe, an economist at SMBC in Singapore, told Reuters that additional stimulus may be needed to counter the impact of U.S. tariffs.

George Efstathopoulos, a portfolio manager at Fidelity International, suggested to Bloomberg that China may not need "a big bazooka stimulus" but should calibrate policies based on trade developments.

Data for specific sectors caught analysts by surprise, as reported by Bloomberg. For energy, nuclear power generation surged over 20 percent in March, reflecting China's expanding capacity. Cross-border platforms like DHGate rallied after viral TikTok promotions, with logistics firm CTS International hitting two consecutive 10 percent daily gains.