China's gross domestic product (GDP) grew by 5% in the first quarter compared to a year earlier, according to official data released on Tuesday. This figure exceeded economists' expectations of around 4.8%, indicating a more robust economic performance than anticipated amidst a complex global landscape.
However, this growth occurred against a backdrop of significant international turmoil. The US-Israel war with Iran, which began on February 28, has severely disrupted global energy supplies, with Asian countries particularly hard hit. China's GDP release also marks the first since Beijing cut its annual economic growth target last month to a range of 4.5%-5%, its lowest expansion goal since 1991, reflecting deeper structural adjustments.
The rebound from a weaker expansion of 4.5% in the previous quarter was driven by manufacturing, while the world's second-largest economy continues to be weighed down by falling property investment. Kyle Chan, an analyst from the Brookings Institution, noted that cars and other exports were a "major bright spot" in the data, but cautioned that the full effects of the Iran war are yet to be seen, with next quarter's GDP likely to be weaker due to trade disruptions.
China's latest economic objectives, announced in March under its new Five-Year Plan, include pledges to invest heavily in innovation, high-tech industries, and efforts to boost domestic spending. The ruling Communist Party is attempting to reshape the country's economy, which struggles with issues like weak consumption, a shrinking population, and a prolonged property crisis. Externally, China faces an energy crunch from the Iran war and global trade tensions, including tariffs policies from the US regime under President Donald Trump.
Currently, China faces a 10% US tariff on most of its goods. US Treasury Secretary Scott Bessent said on Tuesday that these levies may be restored by early July to levels in place before the Supreme Court struck down many import taxes. Trump and Chinese President Xi Jinping are expected to meet in China in May, amid ongoing geopolitical friction.
On Tuesday, China published monthly export numbers for March, showing a sharp slowdown in growth as the conflict pushed up inflation and curbed consumer spending. According to data from the General Administration of Customs, China's export growth slowed sharply to 2.5% last month compared to the same time last year, marking a six-month low after a jump of over 20% in combined January-February exports.
Yixiao Zhou, an economics lecturer at the Australian National University, suggested that the surge in import value is likely due to rising global costs from the Iran war. Iran's threats against vessels using the Strait of Hormuz have driven up crude oil prices and related materials like plastics. While China is less reliant on Gulf oil than other major Asian economies such as Japan and South Korea, petrol is becoming more expensive domestically, and some Chinese airlines have cut flights due to surging jet fuel prices.
Zhou added, "Export growth ultimately depends on your trading partners' economies. It is hard to sustain that growth at a very high rate continuously." This underscores the vulnerabilities in China's economic model, as global instability and internal pressures could hinder future expansion, despite the stronger-than-expected Q1 performance.
Source: www.bbc.com