“The international order is crumbling into disarray,” Xi Jinping complained this week.

I’d call that melodramatic if it weren’t true. Apparently, Xi’s assessment was even more foreboding untranslated. In Chinese, the expression means disorder and immorality.

Thankfully, there’s a lodestar: China, a nation of “principle and integrity,” as Xi put it, while explaining to the Spanish prime minister that the West should “resist any regression toward the law of the jungle.”

Xi’s high-minded rhetoric (an oblique criticism of the US and Donald Trump’s war on Iran) is a bit hard to take. This is a guy who presides as a totalitarian dictator over 1.4 billion people, who keeps two of the world’s worst tyrants as pets and who knowingly facilitates the war in Ukraine.

A principled band of peacekeepers Vladimir Putin, Xi and Kim Jong Un are not. While “integrity” might work for Xi in some contexts, it’s not a word that’s applicable very often to the leaders of China’s client states.

Anyway, figures released Thursday suggested Xi’s economy’s held up pretty well during the first quarter despite what an NBS statistician called “severe” external circumstances, by which he meant the war.

The headline GDP print, 5%, beat estimates and marked the swiftest pace since Q2 of last year.

As the NBS was keen to point out, the result looked even more impressive considering the high comp: The Chinese economy expanded 5.4% this time last year.

Between that and the onerous international circumstances, Thursday’s result should be cherished, Beijing suggested. One of Xi’s apparatchiks called it “precious.”

Thanks to the price impact of the war, the implied deflator was the least negative in three years but, disappointingly, China still spent a 12th quarter in deflation.

The figure below shows you the deflator with producer price growth, which turned positive in March for the first time since 2022.

Economists suspected the upturn in factory gate prices presaged an exit from economy-wide deflation in Q1. What can you say? Close, but no cigar.

And anyway, would this really count as “success” for the Party: An exit from deflation brought on by a Mideast war? Note that consumer price growth, both headline and core, decelerated in March following the prior month’s holiday fillip.

In a testament to how far away China remains from “organic” reflation (if you will), retail sales growth in March was just 1.7%, a lackluster result that underscored the Party’s struggle to resuscitate domestic demand.

The gap with industrial output, which grew 5.7% last month, was the widest since December and the third-widest since retail sales growth turned negative late in 2022 when Xi abandoned COVID curbs to quell popular discontent.

Fixed investment slipped to 1.7% in March. That’s a cumulative figure. It was 1.8% in January and February. 2025, you’ll recall, was the worst year ever for FAI, which contracted by nearly 4%. It was the first ever annual decline.

Private-sector investment was negative in March for a 10th month. That trend’s pushing up the surveyed jobless rate despite what I’m sure are the NBS’s best efforts to cap it.

As the figure above shows, the growth rate of the outstanding stock of yuan loans slipped below 6% in March to a new record low. Suffice to say credit demand’s very tepid.

Bottom line: The strong headline growth readout from China on Thursday masked a worsening bifurcation.

Given China’s extraordinary efforts in the green energy space, it wouldn’t be right to say the country’s regressing to a “smokestack” model. But China remains heavily (heavily) reliant on manufacturing, and there’s little evidence (if there’s any at all) that Xi’s efforts to revive domestic demand are bearing fruit.