(March 17): Chinese consumption, investment and industrial production exceeded estimates to start the year, pointing to signs of resilience for an economy still in need of more stimulus as Donald Trump’s tariffs threaten growth.

The upswing in January-February suggested Beijing’s pro-growth pivot in late September continued to feed momentum for the world’s second-biggest economy. At the same time, the property market stayed under pressure and unemployment rose, a sign of vulnerabilities that could be exposed if US tariffs inflict more pain across China’s manufacturing and add to deflation risks by throttling exports.

Retail sales increased 4% in the first two months from a year earlier, the National Bureau of Statistics said Monday, exceeding economist forecasts in the best reading since October. Industrial output rose 5.9%, higher than the median estimate in a Bloomberg survey of analysts. Growth in fixed-asset investment picked up to 4.1%, the fastest since the gain in the first four months of 2024.

“Significant uncertainties remain, but we feel that upside and downside risks are roughly evenly balanced,” said Lynn Song, chief economist for Greater China at ING Bank.

The figures provide the most comprehensive snapshot yet of how China’s economy has fared since Trump embarked on a new trade war. An expanded programme to subsidise consumers and businesses who trade in old equipment is helping lift demand, while front-loading of shipments by exporters is propping up manufacturing.

“China rarely fails to achieve its growth target, and we expect that policy support will continue to roll out to help offset the tariff impact on growth this year,” ING’s Song wrote in a note after the data release, as he revised up his growth forecast for this year to 4.7% from 4.6% earlier.

Senior economic officials said recently they carved out plenty of room to act in the face of uncertainty and risks, after the government announced an ambitious growth target for 2025 of around 5% at the annual session of the Communist Party-controlled parliament that concluded last week.

Economists at Australia & New Zealand Banking Group also upgraded their growth projection of the country’s gross domestic product after the data release, to 4.8% for 2025 from 4.3% previously.

China’s statistics bureau combines data for January and February to smooth out distortions caused by the irregular timing of the Lunar New Year holiday.

China’s front-loading of shipments abroad has been supporting industrial production at the start of the year, while an early roll-out of fiscal stimulus this year contributed to faster infrastructure investment growth, according to Jacqueline Rong, chief China economist at BNP Paribas SA. Exports reached a record US$540 billion (RM2.4 trillion) in the first two months of the year.

However, a prolonged property sector slowdown continues to weigh on the economy and higher tariff woes loom ahead, she cautioned. The floor space of new home sales shrank again in the last two months and property development investment slumped 9.8%, according to NBS numbers.

“The real estate sector will remain a drag on the economy this year,” Rong said. “Looking forward, the tariff impact on exports will become evident sooner or later, and the downside risks on exports will definitely show up.”

So far, traders weren’t too impressed with the seemingly upbeat data. Chinese stocks traded in a narrow range, with the benchmark CSI 300 Index 0.3% lower as of 2.52pm local time.

Chinese 10-year bonds held losses, with the yield up five basis points to 1.88%, set for the highest in around a week. The offshore yuan weakened 0.1%.

“The market reaction has been underwhelming” to the “mixed picture” painted by the numbers, said Billy Leung, an investment strategist at Global X ETFs. He said investors were “hoping for more from policy.”

Lifting consumer spending is key to countering US policies that are upending global trade and causing a slowdown of Chinese exports, which contributed to nearly a third of the country’s economic expansion in 2024.

As part of an effort to boost domestic spending, policymakers earlier expanded China’s trade-in programme for consumer goods and introduced measures to restore household confidence.

The latest data reflected demand for goods that were eligible for subsidies. Retail sales of products ranging from furniture to home appliances rose sharply. Holiday makers also splurged during the week-long Chinese New Year break through early February.

Highlighting the government’s push to sustain the recovery momentum in household spending, policymakers over the weekend unveiled a special action plan aimed at reviving consumption. It marks China’s latest effort to expand domestic demand, the government’s top economic task this year.

Investors await further clues from top officials during a press conference set to be held at 3pm Monday on steps to boost consumption.

Citigroup Inc anticipates “a window for policy implementation” over the next few months, with a cut in the amount of cash banks must keep in reserve next quarter and a rate reduction in the subsequent three months. China’s leadership will likely use the mid-year Politburo meeting to assess progress it said.

“All eyes could be on property and consumption support, as well as Supply-Side Reform 2.0” to cut capacity, Citigroup economists including Xiangrong Yu said in a report Monday. “Looking ahead, growth momentum could weaken as external headwinds gather.”

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