As international tensions multiply, it is not useless, given China's weight in the global economy, to observe how the country is going through these crises and to what extent it would be affected. The growth figures for the 1st quarter have just been published. With a rate of 5.4%, compared to the 1st quarter of 2024, this result is above the official target of 5%. Given the growth acquis achieved at the end of last year, it would be logical to assume that this objective will be achieved. On the contrary, the International Monetary Fund has just revised its forecast downwards, from 4.6 to 4%. The explanation sometimes put forward is that these figures are the result of the anticipation of tariff increases and an artificial increase in exports. What is the real situation?
The volume of foreign trade remained virtually stable (+1.4%) but this stability covers a strong increase in exports (+6.9% year-on-year) or 834 billion dollars, while imports fell by 6% or 567 billion, reflecting weak domestic demand. The surplus balance thus reached 267 billion. Developments by region show a growth in exports to developed countries (United States +5.6% and European Union +4.9%) which is in line with the long-term trend and above all a much greater increase (+9.2%) to the countries of Southeast Asia (ASEAN).
Even if we cannot rule out that there was an anticipation of deliveries to the United States caused by the announced increase in customs duties, this is not enough to explain the growth of Chinese GDP. On the contrary, the intensification of trade with its neighbouring countries is a lasting fact since it results from the creation of new production chains. In the future, they should be a growth factor capable of mitigating the consequences of the trade war unleashed by the United States and which could continue, even if these tensions were to be de-escalated.
The other driver of growth was investment, with a strong increase in the manufactured goods sector (+9.1% year-on-year). Infrastructure grew less (+5.8%) and the real estate sector continued to fall (-9.9%). The government has still not found the remedies to this ongoing crisis. On the other hand, the high-tech sector is experiencing strong growth in production (+10%) and an acceleration in investment, with increases sometimes exceeding 20%, as in aeronautics and capital goods. The decline in investment by foreign companies (-9.5%) was offset by the increase in investment by companies from Hong Kong, Macau and Taiwan (+10.8%).
The services sector grew by 5.3% in the 1st quarter, slightly accelerating compared to the previous quarter. It is also driven by the effort to modernise companies with a sharp increase in spending on IT services and information processing and transmission (+10%). On the other hand, the service professions for households (health, hotels, restaurants) grew by only about 5%.
Household consumption grew by 4.6%, a slight acceleration compared to 2024 when, in total, it had grown by only 3.5%. Inflation remains extremely low with an increase of 0.1% in the 1st quarter, as does core inflation (excluding energy and food) with 0.3%. The government has launched two programmes to support household consumption with appropriate financing, one encouraging the use of services (tourism, cultural activities), the other to encourage the purchase of household capital goods (furniture, cars, household appliances). This is the "old-for-new" policy encouraging families to accelerate the replacement of their capital goods with tax advantages. The employment situation in urban areas has remained stable with an unemployment rate that remains around 5%.
In a context of international tension, the Chinese authorities are therefore pursuing an expansionist and countercyclical policy. The Ministry of Finance has announced an increase in the budget deficit to support growth. Funds will be allocated to public institutions so that they can buy shares in companies operating in strategic sectors on the financial markets.
Significant transfers to local authorities will also be undertaken to help them emerge from the real estate crisis through the issuance of very long-term debt securities. With these new financial means, they could proceed with the acquisition of property and land held by developers in crisis to revive housing construction projects that are easily accessible to the population.
The central bank is also expected to cut interest rates further in 2025 by 30 to 40 basis points and reduce the reserve requirement ratio. The stability of the Chinese currency reflects market confidence and facilitates the adoption of an increasingly accommodative monetary policy to support the country's growth.
The Chinese economy is therefore much less affected by the announcements of higher customs duties than one might have feared, while the country has become the main target of the American administration. It is too early, since these rights have only just been introduced, to measure all the consequences, but three lessons can be drawn from the analysis of the latest published data.
The first is that the Chinese economy is much more resilient than one might have thought. Investment remains a driver of growth and companies have not adopted a wait-and-see attitude. Efforts in the field of high technology have not been slowed down, and to this end the country has hundreds of thousands of engineers and technicians who are trained every year and a very large domestic market, which is an additional factor of competitiveness.
The second lesson concerns the adoption of economic, monetary and fiscal policy tools, inspired by what has long been practiced in developed countries. China is a country with a presence in the international financial markets and it uses them as in any capitalist economy.
The third lesson, and perhaps the most important one with long-term consequences at the international level, is the transformation of the Chinese production model. It is no longer limited to the conversion of what was until now the "factory of the world" into the cradle of competitive companies capable of imposing themselves on the world market. The case of the automotive industry provided a good example of this. This transformation now has a geographical dimension.
Until now, it has been the strong trade and industrial relations with the United States and the European Union that have been at the heart of the Chinese economy. Today, and this can only increase if the American administration persists in its desire to treat China as an enemy, we are witnessing a spectacular development in trade relations with Southeast Asian countries. China's combined trade with Vietnam, Malaysia, Thailand and Indonesia is now higher than with the United States or the European Union.
The Chinese economy is holding up better than one might have thought in the current international environment, as the country faces structural domestic difficulties such as demographic change and is also having to pay the consequences of mistakes made in real estate. But the latest growth figures show that it is able to cope with it. It is perhaps time for its historical partners to become aware of this, because, otherwise, they risk being the first victims of their protectionism.