In a world economy characterised by persistent instability, China’s first quarter economic performance offers a fascinating case study in resilience. Recent data from Beijing paints a picture of an economy steadily advancing despite substantial external pressures—a narrative worth examining in greater detail.
The quarterly snapshot: A strong start for China
China’s official statistics indicate GDP growth of 5.4 percent year-on-year for the first quarter of 2025, representing a robust start to the year that appears to maintain the momentum established in 2024. This figure aligns with Beijing’s full-year target and continues the pattern of remarkable consistency that has characterised Chinese economic reporting.
Chinese officials attribute challenges in the external environment primarily to what they describe as “the U.S. government’s abuse of tariffs” that has “seriously disrupted the international economic and trade order.” While trade tensions certainly exist, this framing conveniently centralises external factors rather than acknowledging domestic structural issues that continue to weigh on growth prospects.
Notably, the first quarter also saw a sharp divergence between China and the United States. According to the U.S. Bureau of Economic Analysis, real GDP in the U.S. contracted by 0.3 percent on a quarter-over-quarter, seasonally adjusted annual rate. This marked the weakest economic performance since early 2022 and a significant slowdown from the previous quarter’s 2.4 percent expansion. Analysts had projected slight growth, but the contraction surprised many, driven in part by a surge in imports ahead of new tariffs and declining government spending.
This contrast underscores China’s relative strength in the current global economic landscape, at least in headline terms. While the U.S. faces increased recessionary risks and market volatility, China appears to be stabilising—at least for now—through domestic coordination and industrial momentum.
Strategic messaging from Beijing
A recent meeting of the Political Bureau of the Communist Party emphasized responding to “uncertainty of drastic changes in the external environment with the certainty of the country’s high-quality development.”
This messaging reflects Beijing’s current economic philosophy—focusing on qualitative improvements rather than raw growth figures, while projecting confidence amidst global uncertainty.
Industrial performance and technological advancement
The first quarter data highlights several notable industrial achievements, including:
- Advanced testing of the CR450 high-speed rail system
- A 12,000-meter automated onshore drilling rig reaching 10,000 meters in depth
- Delivery of the world’s first ultra-large dual-fuel container ship
- The successful launch of the Shenzhou-20 manned spacecraft
These accomplishments represent genuine technological progress and reflect China’s continued advancement in strategically important sectors. They align with Beijing’s long-term goals of technological self-sufficiency and industrial upgrading.
Chinese industrial output reportedly expanded by 6.5 percent year-on-year in Q1, with exports rising by 6.9 percent. Total imports and exports exceeded 10 trillion yuan for the eighth consecutive quarter—a milestone that underscores China’s continued importance in global trade despite geopolitical complications.
The price competitiveness of Chinese manufacturing remains striking. Examples circulating online suggest some Chinese-made construction machinery sells for approximately $3,700, while comparable American products may cost ten times more. This price differential continues to drive procurement decisions, with reports of American clients purchasing from Chinese suppliers despite tariff barriers.
Four pillars of economic performance
1. Industrial foundation
China has maintained its position as the world’s leading manufacturing power for 15 consecutive years and the top trading nation in goods for eight years running. This industrial dominance rests on a complete manufacturing ecosystem with tightly integrated supply chains that prove remarkably difficult to replicate elsewhere.
Official data suggests domestic demand contributed more than 80 percent to economic growth on average over the past five years. This figure indicates progress toward Beijing’s “dual circulation” goal of reducing export dependency, though consumption growth remains somewhat constrained by household caution.
2. Innovation momentum
The value-added output of high-tech manufacturing enterprises increased by 9.7 percent year-on-year in Q1, raising its share to 15.7 percent of total industrial output. This reflects meaningful progress in China’s push toward technological advancement, though the precise definition of “high-tech” in official statistics warrants scrutiny.
3. International economic engagement
Despite geopolitical tensions, China continues to engage actively with the global economy. The first quarter saw a 4.3 percent year-on-year increase in newly established foreign-invested enterprises, with imports and exports rising by 1.3 percent. Foreign visitors to China increased by 33.4 percent, suggesting some normalisation in business travel and tourism.
China’s continued economic openness was showcased at the 5th China International Consumer Products Expo in Hainan, which attracted over 1,700 enterprises and more than 4,100 brands from over 70 countries and regions. Such events reflect Beijing’s efforts to maintain international economic engagement despite rising geopolitical complications.
4. Macroeconomic policy coordination
Chinese authorities appear to be effectively coordinating fiscal and monetary policies to support growth while avoiding excessive stimulus. The combination of targeted investments, moderate liquidity support, and incremental reforms appears to be delivering stability in the near term.
Beijing’s experience managing economic challenges over multiple decades provides a deep policy toolbox. The centralized decision-making system enables rapid policy adjustments when needed, though this sometimes comes at the cost of market-driven resource allocation.
Context and complexities beneath the surface
While China’s first quarter performance appears solid, a complete assessment requires acknowledging several complexities not prominently featured in official narratives.
The property sector continues to face significant challenges, with developer defaults and price declines creating headwinds for local government finances and household wealth. Youth unemployment remains elevated compared to historical norms, though official statistics have become less transparent on this metric.
China’s demographic challenges—including a rapidly aging population and declining birth rate—represent long-term structural constraints that policy interventions have thus far failed to meaningfully address. Productivity growth will need to accelerate to compensate for the declining workforce.
Trade relationships are becoming more complex as traditional partners increasingly view economic engagement through national security lenses. The resulting “friend-shoring” and supply chain diversification efforts create challenges for Chinese exporters, though markets in the Global South offer expanding opportunities.
Debt levels across the economy require careful management, with local government financing vehicles (LGFVs) representing a particular concern. While central government debt remains manageable, the broader debt landscape requires continued deleveraging efforts that may constrain growth.
Balanced perspective: Strength with caveats
China’s economic performance during the first quarter demonstrates genuine resilience in several key areas. Manufacturing strength, technological advancement, and effective policy coordination provide meaningful buffers against external pressures. The size and dynamism of the domestic market further enhance economic stability.
However, structural challenges remain that will require sustained reform efforts. The balance between state-led development and market-driven innovation continues to evolve, with implications for long-term growth potential. Geopolitical complications add another layer of complexity to China’s economic trajectory.
For global businesses and policymakers, China’s economy remains too significant to ignore but too complex for simplistic assessments. The first quarter data suggests an economy that continues to advance despite headwinds—especially when contrasted with the stagnation or contraction seen in the U.S. and other advanced economies—though perhaps not with the transformative momentum that characterized earlier decades of development.
As China navigates this complex economic environment, its ability to address structural challenges while maintaining stability will determine whether its economic resilience proves sustainable over the longer term. For now, the first quarter data offers evidence of continued economic strength, even as questions about longer-term trajectories remain.