China: Q1 growth likely remained solid at 5.2% y/y – Standard Chartered

March PMIs beat market expectations, although Q1 momentum softened from Q4-2024. We raise our 2025 growth forecast to 4.8% from 4.5% on Q1 outperformance, firm policy assurances. CPI deflation likely eased in March on base effects; the import contraction may have persisted, Standard Chartered's economists Hunter Chan and Shuang Ding report.

Raising GDP growth forecasts

"China’s official manufacturing PMI edged up to 50.5 in March from 50.2 in February as demand improved, consistent with the Caixin PMI and our SMEI survey. The new orders and new export orders indices rebounded to nearly one-year highs, supporting solid production activity. Meanwhile, the average manufacturing PMI edged down to 49.9 in Q1 from 50.2 in Q4-2024. In addition, the average services PMI fell 0.5pts from Q4-2024 to 50.2 in Q1, indicating a q/q slowdown."

"With both January-February real activity and March PMIs beating expectations, we raise our Q1 GDP growth forecast to 5.2% y/y from 4.8% prior, with q/q growth slowing to 1.3% from 1.6% in Q4-2024. Imports may have continued to decline, resulting in a sizeable trade surplus. While China remains vulnerable to additional US tariffs and restrictions, the authorities’ commitment to roll out more stimulus when needed should help curtail downside risks. We further revise our quarterly growth forecasts to 5.1% y/y for Q2 (4.7% prior), 4.8% for Q3 (4.6%) and 4.2% for Q4 (4.1%); as such, we now forecast 2025 growth at 4.8% (4.5% prior)."

"We expect CPI inflation to have stayed negative in March on falling food and fuel prices, albeit easing from February levels, thanks to base effects. Growth in CNY loans outstanding likely eased further in March on soft loan demand and the ongoing debt-to-bond swap programme. Meanwhile, government bond financing remained solid, supporting a m/m increase in new total social financing (TSF)."