What's happened
As China grapples with the escalating trade war initiated by the U.S., the Politburo is set to address urgent economic issues. Despite a solid 5.4% GDP growth in Q1 2025, concerns loom over sustaining this momentum amid high tariffs and external pressures. Policymakers are expected to implement existing stimulus measures while considering further monetary easing.
What's behind the headline?
Economic Outlook
- Growth Concerns: Despite a strong start in Q1, the trade war's impact is expected to hinder growth in the coming months.
- Policy Response: The Politburo's upcoming meeting will likely prioritize implementing existing stimulus measures and may consider further monetary easing to support struggling export firms.
- Domestic Demand Focus: With external pressures mounting, boosting domestic consumption is crucial for sustaining economic momentum.
Trade War Implications
- Tariff Impact: The U.S. has imposed tariffs totaling 145%, significantly affecting China's export market, particularly in key sectors like semiconductors.
- Future Projections: Analysts predict a decline in GDP growth forecasts, with some estimates dropping to as low as 3.4% for 2025 due to the trade conflict.
- Strategic Shifts: Beijing's focus on cooperation with international bodies like the WTO indicates a strategic pivot to mitigate the effects of U.S. unilateralism.
What the papers say
According to the South China Morning Post, the Politburo's April meeting will address urgent economic issues, emphasizing the need for swift implementation of existing stimulus measures. Ding Shuang, chief Greater China economist at Standard Chartered Bank, noted that while the first quarter showed decent growth, sustaining this momentum is critical amid external shocks.
Al Jazeera highlighted that industrial output rose significantly, but the overall economic environment remains complex due to the trade war. Lynn Song from ING emphasized that more monetary and fiscal stimulus will likely be necessary to meet China's growth targets.
The National Bureau of Statistics reported a solid GDP growth of 5.4% in Q1, but concerns persist about the sustainability of this growth in light of escalating tariffs from the U.S. Goldman Sachs has revised its GDP forecasts downward, reflecting the anticipated negative impact of the trade war on China's economy.
How we got here
China's economy started 2025 with a 5.4% GDP growth, but the ongoing trade war with the U.S. poses significant challenges. Tariffs have escalated, impacting exports and raising concerns about meeting the annual growth target of around 5%. Policymakers are focusing on domestic demand to counteract external shocks.
Go deeper
- What are the implications of the trade war for China's economy?
- How is China planning to stimulate domestic demand?
- What are the forecasts for China's GDP growth this year?
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