UBS Economics-China Economic Perspectives _China by the Numbers (April 202...-114901868

ab24 April 2025Global ResearchChina Economic PerspectivesChina by the Numbers (April 2025) Our guide to Chinese monthly dataWhat the numbers are, what they mean and the outlook going forward.Robust Q1 GDP growth better than expectedQ1 GDP growth held up well at a resilient pace of 5.4% YoY, better than market expected, while sequential growth momentum slightly moderated. The resilient pace of GDP growth has been supported by improving retail sales and better FAI growth, both partly due to policy stimulus. Meanwhile, the property downturn continued, with seasonally adjusted sales and new starts in Q1 falling from Q4, while export growth slowed despite a notable rebound in March. The Q1 GDP deflator stayed in contraction, at -0.8% YoY.　 General fiscal revenue growth slowed notably in Q1, leading to a fiscal deficit. (See more in our note.) Trade friction escalatedWe estimate nearly 60% of US imports from China face 145% additional tariffs this year, while the rest (less than 40%) face 20-45% tariff hikes. Amid high uncertainty in tariff developments and their impact, our base case assumes: 1) the currently announced tariff hikes of the US and China remain; 2) the 10% US tariff hikes on the rest of the world also largely stay at a similar magnitude; and 3) some of China’s other trading partners may raise tariffs on China, but only on targeted goods. Thus, we expect China’s exports to the US to fall by two-thirds and China's total exports to fall around 10% in USD terms in 2025. High frequency data suggests port cargo throughput and container throughput growth each softened to 4% YoY and 7% YoY in the first 20 days from 5% YoY and 10% YoY in March, respectively, not yet affected much by higher tariffs. We think new policy stimulus is highly needed to support the economyGiven the unprecedented tariff shock, we think the government needs to introduce broad fiscal expansion by another 1.5-2ppt of GDP on top of the NPC stimulus plan. New fiscal stimulus may not be rolled out immediately (see more discussion). Additional fiscal expansion could be used to alleviate the challenges of exporters and manufacturers, support local government finances and infrastructure spending, and boost consumption and social spending. We also expect the government to push for more progress in property inventory destocking. We believe the PBC may start to cut the policy rate and RRR soon (although the PBC has not cut LPR in April), with total rate cuts of at least 30-40bps in 2025E.Lower 2025 GDP forecastFactoring in robust Q1 growth, the unprecedented tariff shock, the ongoing but easing property downturn and expected additional policy stimulus, we lowered our GDP growth forecast to 3.4%, with a high margin of error. We expect the slowdown to mainly come from exports, while domestic consumption and investment improve slightly. We foresee deeper deflationary pressure, with CPI at -0.6% for 2025 and no significant USDCNY movement in either direction (USDCNY of 7.5 at end-20