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China: An Economic Snapshot Amidst Tariff Uncertainties

  • etao948
  • May 20
  • 3 min read

By Marianne Mineo, Economist at Silverhorn Group

Published on May 19th, 2025


China reported stronger than expected YoY growth in Q1 2025, with GDP coming in at 5.4%. Foreign trade grew 1.3% YoY in Q1, driven by an increase in exports, although imports fell due to weaker domestic demand. March saw a 6% YoY increase in total trade, with exports up 13.5% and imports down 3.5%. Analysts warn that the export surge may be temporary as it was driven in part by the rush to beat higher US tariffs. That being said, US exports came in 3rd place and were therefore not the primary driver of demand.



Retail sales in China grew 4.6% YoY in the first quarter, reaching RMB 12.5 trillion, with March seeing a 7.7% increase. Online retail sales surged 7.9%. The "old-for-new" initiative boosted sales of communication equipment, household appliances, and furniture. However, overall consumption remained sluggish due to deflationary pressures, with the CPI falling 0.1% YoY.


Fixed asset investment reached RMB 10.3 trillion, up 4.2% year-on-year, driven by infrastructure and manufacturing. However, real estate investment fell by nearly 10%. High-tech sectors saw strong growth, particularly in information services and aerospace. State-owned enterprises led the investment surge, while private and foreign-invested enterprises lagged (1).


Due to the escalating trade war, and uncertainty over whether the EU will join in (2), global banks have downgraded China's annual growth forecasts. UBS, CITI, and Goldman Sachs have lowered their projections to 3.4%, 4.2%, and 4%, respectively. All projections fall short of China's 5% growth target. The Chinese government is expected to roll out economic support measures, with Premier Li Qiang calling for proactive macroeconomic policies to stimulate business activity and domestic demand. The Politburo will likely discuss these measures at an upcoming meeting, aiming to realign China's growth trajectory and offset any impact the trade war may have (3).


On the technology front, and as the world’s largest semiconductor consumer, China is further shielding itself from sanction vulnerabilities by developing its own top-end semiconductor chips. Huawei’s Ascend 910D is designed to outperform Nvidia's H100, and the company plans to deliver over 800,000 units this year (4). In 2024, China spent $50 billion on chipmaking equipment and is expected to spend a further $38 billion in 2025. For contrast, Korea and Taiwan are projected to spend $21.5 and $12 billion, respectively, while Japan and the America are expected to spend $14 billion each, and Europe a mere $9 billion (5).


China's semiconductor market reached $183 billion in 2024 and is projected to grow to $430 billion by 2033, at a CAGR of 8.9%. Key drivers include the expanding automotive industry, increased device connectivity, and a focus on renewable energy and energy efficiency (6).



By the end of 2025, China is expected to account for 28% of global mature chip production, raising concerns over a “China shock” due to prices which significantly undercut Western firms (7).


In the end, China will continue to plug along, doing what it does, and has become almost dismissive of further tariff threats and trade war escalations. Its trade network and flexibility provide sufficient resilience to effectively just wait it out (8).


 
 
 

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