China: Stronger-than-expected Q1 growth – Standard Chartered

Q1 GDP growth remained solid at 5.4% y/y, providing a cushion to meet the annual growth target. March real activity growth beat market consensus by a significant margin; outlook remains cautious. Front-loaded policy measures to help mitigate downside risks; more stimulus to be rolled out if needed, Standard Chartered's economists note.

Robust production and consumption in Q1

"China’s Q1 real GDP growth remained resilient at 5.4% y/y. Meanwhile, seasonally adjusted GDP growth eased modestly to 1.2% q/q in Q1 from 1.6% in Q4-2024. The stronger-than-expected y/y growth in Q1 likely provides a cushion for meeting the annual growth target of c.5% this year against the backdrop of increasing external headwinds."

"Real activity growth accelerated in March, beating market consensus by a significant margin. Industrial production (IP) growth jumped to 7.7% y/y in March from 5.9% in January-February, likely indicating front-loaded activity, along with a 12.4% surge in y/y export growth. Consumer goods retail sales growth edged up 1.9ppt to 5.9% y/y, registering the fastest growth since end-2023, partly thanks to base effects and the trade-in programme. Services retail sales growth remained solid at 5% y/y. We estimate that fixed asset investment growth picked up 0.2ppt to 4.3% y/y in March on faster private, manufacturing and infrastructure investment growth. Meanwhile, real estate investment continued to contract by 10% y/y. Last but not least, services production index growth accelerated 0.7ppt from 2M-2025 to 6.3% y/y."

"Despite the solid performance in Q1, the unprecedentedly high bilateral tariffs between the US and China imposed in early April will likely weigh sharply on the trade and growth outlook. We continue to expect fiscal policy to do the heavy lifting, supplemented by easing monetary policy, to mitigate downside risks. We estimate that an additional 1.0-1.5% of GDP of fiscal stimulus would be needed if the tariffs stay at current levels for a long period, to prevent growth from significantly undershooting the growth target."