^{Source: Times of India}

Robust Start to 2025: GDP Growth Exceeds Forecasts

China's economy demonstrated unexpected strength in the first quarter of 2025, with Gross Domestic Product (GDP) expanding by 5.4% year-on-year, outpacing the 5.1% growth anticipated by analysts. This performance marks a continuation of the recovery that began in late 2024, bolstered by comprehensive policy stimulus measures.

Key Economic Indicators Show Positive Momentum

• Retail Sales: In March, retail sales increased by 5.9% compared to the same period last year, surpassing the 4.2% growth forecasted by economists. This represents the strongest retail growth since December 2023.
• Industrial Output: Industrial production rose by 7.7% year-on-year in March, exceeding the median estimate of 5.8%.
• Fixed Asset Investment: Investment in fixed assets grew by 4.2% in the first quarter, aligning with expectations. However, the real estate sector continued to lag, with investment declining by 9.9% year-on-year as of March.
• Unemployment Rate: The surveyed urban unemployment rate decreased to 5.2% in March from a two-year high of 5.4% in February, indicating a modest improvement in the labor market.

Government's Growth Target and Stimulus Measures

Despite the positive first-quarter performance, China's leadership maintains an annual growth target of "around 5%" for 2025. To support this goal amid external pressures, the government has announced plans for significant fiscal stimulus:

• Special Treasury Bonds: Issuance of 1.3 trillion yuan (approximately $179 billion) in ultra-long special treasury bonds, up from 1 trillion yuan in 2024.
• Local Government Debt: Authorization for local governments to issue 4.4 trillion yuan in special debt, an increase from 3.9 trillion yuan the previous year.

These measures aim to bolster infrastructure, manufacturing, and social services, countering the potential economic drag from international trade tensions.

Escalating Trade War with the United States

The economic outlook is clouded by escalating trade tensions between China and the United States. In early April, the U.S. increased tariffs on Chinese imports to 145%, prompting China to retaliate with duties of up to 125% on U.S. goods.

These developments have led major investment banks to revise China's full-year GDP growth forecasts downward to approximately 4.5%, below the official target.

Innovation Amid Challenges: DeepSeek's AI Advancements

Amid economic uncertainties, China's commitment to innovation remains steadfast. In January, Chinese startup DeepSeek unveiled its R1 AI model, a reasoning system that outperformed many Western counterparts. The company is accelerating the release of its successor, R2, aiming to solidify China's position in the global AI landscape.

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