China is anticipated to report a growth of approximately five percent for the first quarter on Wednesday, spurred by exporters striving to avoid increased tariffs from the US, though still hindered by weak domestic consumption, according to analysts.
The ongoing tensions between Beijing and Washington have escalated since US President Donald Trump initiated a series of global tariffs, specifically impacting Chinese goods.
In a reciprocal escalation, tariffs imposed by the US on China have surged to 145 percent, while China has responded with a retaliatory tariff of 125 percent on US imports.
The forthcoming official statistics will shed light on how concerns surrounding the trade conflict are influencing China’s delicate economic recovery, which is already under strain from persistently low domestic consumption and a crisis in the property market due to excessive debt.
Polls conducted by AFP indicate that the world’s second-largest economy likely grew by 5.1 percent from January to March, a decrease from the previous quarter’s 5.4 percent.
Data released on Monday revealed that China’s exports increased more than 12 percent year-on-year in March, exceeding expectations, which analysts attribute to a “frontloading” of orders ahead of Trump’s forthcoming tariffs coming into effect on April 2.
This surge in exports is believed to have positively impacted the economic growth in the first quarter.
However, analysts caution that this GDP figure might represent a rare point of optimism in what is projected to be a challenging year for China’s economy.
“China’s economy is encountering pressures from various sources,” stated Sarah Tan, an economist at Moody’s Analytics.
“The favorable export conditions are diminishing now that US tariffs have been implemented,” she added.
“Domestic demand continues to be weak amid high unemployment and a real estate market undergoing correction,” remarked Tan.
Alicia Garcia-Herrero, the Asia Pacific chief economist at Natixis, told AFP that while the first quarter likely performed “quite well,” the second quarter is expected to be significantly poorer.
She highlighted a surge in exports to the US to avoid further tariffs.
The period was also supported by increased consumer spending during the Lunar New Year celebrations, when millions returned to their hometowns.
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Last year, Beijing implemented a series of bold measures aimed at rejuvenating the economy, including interest rate reductions, lifting restrictions on home purchases, raising the debt ceiling for local governments, and enhancing support for financial markets.
However, following a vigorous market surge fueled by hopes of substantial stimulus, confidence has diminished as authorities did not disclose specific bailout figures or elaborate on their commitments.
Analysts anticipate additional support from Beijing to mitigate the impact of the tariffs.
A critical aspect will be stabilizing the struggling real estate services sector, which currently constitutes six percent of GDP, according to analyst Guo Shan.
“If China managed its real estate adjustment over the past three years, it should be able to handle the tariffs from the US, particularly if it can stabilize the property sector this year,” remarked Guo, a partner at the consultancy Hutong Research.
Tan from Moody’s Analytics also expects the Chinese government to utilize fiscal and monetary policies this year.
“The authorities will likely introduce more stimulus aimed at households, and the People’s Bank of China may reduce key lending rates,” she noted.
China is working to insulate its economy against tariffs by increasing consumption and investing in crucial industries.
Nonetheless, the widening gap between the two nations could jeopardize hundreds of billions of dollars in trade and undermine a vital economic component, particularly in the face of weak domestic demand.
“In this context, we perceive significant risks to China’s GDP growth,” wrote analysts from ANZ in a report.
They mentioned an “extreme scenario” where China could face another external shock similar to that of the 2008 financial crisis.
Growth prospects for the second quarter could worsen due to ongoing tariff dynamics, Guo warned.
“Exports are expected to decline, and investments may also decelerate as uncertainties impact corporate decision-making,” he stated.
China’s leadership set an ambitious growth target of around five percent last month, pledging to prioritize domestic demand as a key economic driver.
Many economists view this goal as overly optimistic given the challenges currently facing the economy.