China's Q1 Growth Rate at 5.4%... Exceeds Expectations Amid Trade War

Industrial Production Rises 6.5% Driven by New Energy Vehicles and Robots
Deflation and Real Estate Concerns Persist

Amid escalating US-China trade tensions, China's economy recorded a growth rate of 5.4% in the first quarter of this year.

According to the National Bureau of Statistics of China on the 16th, China's first-quarter gross domestic product (GDP) reached 31.8758 trillion yuan (approximately 621.3 trillion won), growing 5.4% year-on-year at constant prices.

Qingdao, Shandong Province, China. Photo by AFP Yonhap News

This performance exceeded market forecasts compiled by Reuters (5.1%) and Bloomberg News (5.2%). Compared to the fourth quarter of last year, it increased by 1.2%.

China's economy recorded a growth rate of 5.4% in the fourth quarter of last year, achieving the growth target (around 5%), and continued its recovery by maintaining the same level in the first quarter. This year, it has also set a growth target of "around 5%".

With authorities focusing on revitalizing domestic demand, China's retail sales in the first quarter increased by 4.6% year-on-year.

Industrial production in the first quarter rose 6.5% year-on-year. In particular, production increases in new energy vehicles (45.4%), 3D printing equipment (44.9%), and industrial robots (26.0%) led the upward trend.

However, fixed asset investment in the first quarter increased by 4.2% year-on-year, but real estate development investment decreased by 9.9%, indicating a continued slump in the real estate market.

The consumer price index (CPI) in the first quarter fell by 0.1% year-on-year. The March CPI also dropped by 0.1%, maintaining concerns about deflation.

Goods exports and imports in the first quarter increased by 1.3% year-on-year, with exports rising 6.9% year-on-year.

The urban unemployment rate in the first quarter was 5.3%, slightly up from 5.2% in the same period last year.

March retail sales increased by 5.9% year-on-year, surpassing Reuters' forecast of 4.2% and rising above the 4% recorded in January and February. March industrial production also grew by 7.7%, significantly exceeding Reuters' forecast of 5.8%. However, Bloomberg noted that this is likely due to strong export demand in the first quarter and emphasized the need to monitor future trends.

The National Bureau of Statistics stated, "Overall, various macro policies in the first quarter continued to be effective, leading to a stable start for the national economy and sustained recovery," but added, "The external environment is becoming more complex and severe, domestic effective demand growth momentum is insufficient, and it is necessary to strengthen the foundation for continuous economic recovery and improvement."

Meanwhile, as the US-China trade war intensifies, several investment banks are lowering their growth forecasts for China this year. Morgan Stanley recently reported that growth is likely to deteriorate sharply from the second quarter. UBS Group predicted the day before that US tariffs would pressure exports, resulting in China's growth rate reaching only 3.4% this year.