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Industrial output grew 6.7% year-on-year in April, National Bureau of Statistics (NBS) data showed, accelerating from the 4.5% pace seen in March
Published : 17 May 2024, 12:22 PM
China's factory output topped forecasts in April, helped by improving external demand, although retail sales unexpectedly slowed and the property sector remained a drag on the economy, piling pressure on Beijing to do more to support growth.
A mixed set of data on Friday followed other indicators for April that showed a patchy recovery in the world's second-largest economy, with trade and consumer prices perking up but credit growth mired by weak consumer confidence.
Industrial output grew 6.7% year-on-year in April, National Bureau of Statistics (NBS) data showed, accelerating from the 4.5% pace seen in March and above the 5.5% increase tipped in a Reuters poll of analysts.
However, retail sales rose just 2.3%, the slowest increase since December 2022, off the 3.1% increase in March and far short of the forecast 3.8% rise.
"The data pattern remains one of strong external demand and weak domestic demand. The weakness in domestic demand is clearly a result of the deterioration in real estate," said Xing Zhaopeng, ANZ senior China strategist.
"Current rebalancing policies, such as consumer goods trade-ins or special treasury bonds, can only partially hedge the downward spiral of domestic demand," he added.
The retail figures were not helped by an unfavourable comparison with April last year, which included two public holidays, a big driver of business for the catering and tourism sectors.
"Industrial production continued to accelerate thanks to strong exports, but growth on most other indicators slowed, pointing to softer domestic demand," said Zichun Huang, China economist at Capital Economics.
"We expect a renewed pick-up over the coming months as fiscal support ramps up again. But any near-term improvement is unlikely to be sustained for long given the underlying structural challenges facing the economy," she added.
PROPERTY PAIN
A protracted crisis in the property sector, a key pillar of the economy, remains a major concern for policymakers, consumers and investors.
New home prices fell at the fastest pace in over nine years in April, separate data showed on Friday, as efforts to prop up the ailing sector show few signs of paying off.
Property has been hit by a regulatory crackdown and is still dragging down overall growth, prompting authorities to double down on support efforts.
China on Friday announced plans for local governments to buy "some" apartments and pledged forceful efforts to deliver unfinished homes, as part of a new round of measures to stabilise the crisis-hit property sector.
The cities of Hangzhou, home of tech giant Alibaba, and Xian both lifted home purchase curbs earlier this month, the latest efforts by local governments to promote home sales.
OVERCAPACITY
While exports have been a bright spot for China, analysts say the jury is still out on whether the bounce is sustainable, particularly as Washington revives a protectionist posture.
The Biden administration this week launched steep tariff increases on $18 billion of exports, including a quadrupling of levies on Chinese new energy vehicles.
That comes amid growing US concerns that investment in China's factory sector is worsening overcapacity in the global economy.
Friday's activity data showed growth in output of 3D printing equipment, new energy vehicles and integrated circuit products at double digits. The US has accused China of creating industrial overcapacity in these sectors.
The European Union has also expressed concerns over cheap Chinese goods flooding its markets, opening a new front in trade tensions with Beijing, which kicked off with the Trump administration's import tariffs in 2018.
MORE POLICY SUPPORT
The government has set an ambitious 2024 growth target of around 5%, which many analysts say will be a challenge to achieve without much more stimulus.
Zhiwei Zhang, chief economist at Pinpoint Asset Management, said the recent run of data showed an economy driven by external demand and struggling to revive domestic demand.
"This set of macro data, combined with the weak credit data in April, may push policymakers to take stronger actions to boost domestic demand," he said. "The likelihood of rate cut in Q2 is rising."
China on Friday kicked off issuance of its 1 trillion yuan ($138.17 billion) of ultra-long special treasury bonds that will have tenors of 20 to 50 years to raise funds it will use to stimulate struggling industries.
Providing potential upside for demand, the job market improved with the nationwide survey-based jobless rate falling to 5.0% in April from 5.2% in March.
"And with the labour market tightening again, consumer spending may regain some momentum," Capital Economics' Huang said.
"But none of this is likely to prevent a renewed slowdown later ahead."
