China’s economy kicked off 2025 with a stronger-than-anticipated performance, defying gloomy forecasts and geopolitical headwinds. According to official data released on April 16, China’s GDP grew 5.4% year-on-year in the first quarter, beating analyst estimates of 5.1%. The world’s second-largest economy remains under intense pressure from a deepening trade war with the United States and ongoing property sector woes, yet it delivered a robust Q1—proving its resilience.

Here are 10 key takeaways from today's major economic publications and expert analyses:

1. Q1 GDP Growth Beats Expectations

China’s economy expanded by 5.4% in Q1 2025 compared to the same period last year, maintaining momentum from the previous quarter. This performance exceeded the 5.1% growth predicted in a Reuters poll, and signaled the strength of both domestic consumption and industrial output despite external and internal pressures. While it still falls short of China’s longer-term targets, the data provided much-needed optimism amid rising uncertainty.

2. Industrial Output and Consumer Spending Accelerate

Industrial production surged 7.7% in March, up from 5.9% in the first two months of the year. Retail sales, a key metric for consumer health, rose 5.9%, up from 4% in January-February. Growth was led by sharp increases in home electronics and furniture sales, supported by a government-backed consumer goods exchange scheme. The uptick underscores how domestic demand is slowly regaining traction after months of stagnation.

3. Quarterly Growth Slows, Pointing to Uneven Recovery

While year-on-year numbers impressed, the quarter-on-quarter growth slowed to 1.2% from 1.6% in Q4 2024. This shows that while momentum exists, it may not be broad-based. Analysts caution that domestic consumption and investment still face structural weaknesses, and the road to recovery remains fragile in sectors like housing and exports.

4. U.S.-China Trade Tensions Reach New Highs

The economic report came just days after former U.S. President Donald Trump ramped up tariffs on Chinese goods to 145%, triggering swift retaliation from Beijing, which raised duties on U.S. imports to 125%. These tit-for-tat measures have dramatically escalated trade tensions, prompting fears of a broader slowdown in global trade. China’s policymakers now face an “unprecedented challenge,” as one UBS report described, to navigate economic diplomacy and shield key industries.

5. Export Spike Likely Temporary

China’s March export numbers were strong, with businesses rushing to ship goods before the new tariffs took effect. But this pre-emptive push could be misleading. Analysts expect a sharp pullback in the coming months as new U.S. levies start to weigh on outbound shipments. With the U.S. being one of China’s largest trade partners, the tariff shock is expected to significantly impact export growth in Q2 and beyond.

6. Real Estate Sector Still a Drag on Growth

China’s troubled real estate market continues to dampen overall economic performance. Property investment dropped 9.9% year-on-year in Q1, slightly steeper than the 9.8% fall in the first two months. New home prices in March were flat, and there are few signs of a meaningful rebound. Beijing has rolled out several policy tools to stabilize the housing market, but confidence remains low.

7. Beijing Signals More Stimulus Ahead

Premier Li Qiang recently pledged more support measures to sustain economic momentum. The Chinese government has already ramped up fiscal spending, increased its annual budget deficit, and launched new consumption incentives. The Politburo is expected to meet later this month to chart out additional policies aimed at cushioning the trade hit and avoiding mass unemployment. Analysts believe more interest rate cuts and infrastructure projects could be on the horizon.

8. IMF and Global Institutions Adjust Forecasts

The International Monetary Fund (IMF) upgraded China’s 2025 growth forecast to 4.5% from 4.2%, citing Q1 resilience and Beijing’s proactive fiscal policies. However, the IMF and others like the World Bank caution that long-term challenges—including an aging population, mounting debt, and the shift away from real estate—continue to cloud the medium-term outlook.

9. Market Analysts Issue Cautionary Notes

While Q1 was strong, analysts like those at UBS and Nomura are dialing back their full-year growth expectations due to the scale of U.S. tariffs and a likely slowdown in exports. UBS has cut its 2025 GDP forecast for China to 3.4%, warning that the export sector faces a “massive adjustment.” The investment bank believes domestic consumption and manufacturing will need to take up the slack, and that policy stimulus must be timely and effective.

10. Global Markets React Cautiously

Asian and global financial markets responded with mixed signals. Chinese semiconductor stocks saw brief gains, while broader indices like the Hang Seng and Shanghai Composite declined slightly on worries that the trade war could dent investor confidence. The yuan remained under modest pressure, reflecting concerns over capital outflows and shrinking foreign investment.

Key Takeaways for CFD Traders from China’s Q1 Economic Growth

For CFD traders, China’s unexpected Q1 growth provides valuable insights into the global markets and potential trading opportunities. Here are key takeaways:

1. Impact on Currency Pairs: With China’s GDP growth outpacing expectations, the CNY/USD pair may experience volatility, especially with ongoing trade tensions. Traders should monitor U.S.-China developments closely for potential shifts.

2. Risk Sentiment: Positive economic performance could boost global risk sentiment, driving capital flows into emerging markets. Be alert to the AUD, NZD, and EM currencies as they might benefit from stronger Chinese demand.

3. Commodity Influence: Increased industrial output and consumption in China could support commodity prices, particularly oil, gold, and metals, offering potential trading setups.

4. Volatility in Export-Oriented Pairs: U.S. tariffs on Chinese goods will likely cause heightened volatility in export-driven currency pairs like EUR/USD and GBP/USD. Be cautious of sudden price swings.

Monitor these factors to adapt your trading strategies and stay ahead of market movements.

Final Thoughts: A Resilient but Fragile Recovery

China’s Q1 economic performance paints a complex picture: strength in the face of adversity, but with visible cracks beneath the surface. Policymakers are walking a tightrope—stimulating growth without inflating bubbles or triggering long-term instability. As the U.S. imposes its toughest trade measures in decades, China must pivot quickly, invest in new growth drivers, and protect employment across its vast economy.

The next quarter will be crucial. Will the government’s stimulus measures be enough to counteract the drag from exports and property? Can domestic consumption continue to recover without household debt spiraling? And how will escalating tensions with the U.S. reshape China's role in global trade?

For now, the message is clear: China has shown it still has the tools and resilience to weather external shocks—but the pressure is mounting.