Sat, June 15, 2024

China’s April Economic Update: Mixed Sector Growth

China Less Inclined To Support The US in Ukraine War

Quick Look:

  • Retail sales grew by 2.3% in April, below the forecast of 3.8%. The holiday period saw a 6.8% increase, driven by home appliances and automobiles.
  • Surged by 6.7% year-on-year, surpassing the expected 5.5%, showing manufacturing sector resilience.

Retail sales in China grew by 2.3% year-on-year in April, falling short of the forecasted 3.8% and marking a slowdown from the 3.1% growth observed in March. However, the holiday period from April 29 to May 3 showed a significant boost, with retail sales growing by 6.8%. Notably, the home appliances sector experienced a 7.9% increase, while automobile sales rose by 4.8%.

Despite the modest growth, there are signs of potential improvement, indicated by improving employment data and increased service consumption. Bruce Pang from JLL commented that while some consumers will remain cautious about spending, the positive trends in employment data and services consumption suggest potential improvement in retail sales.

Industrial Production Surges 6.7% in April, Beats Forecast

China’s industrial production surged 6.7% year-on-year in April, surpassing the forecasted 5.5% and significantly higher than the 4.5% growth recorded in March. This robust performance underscores the resilience of China’s manufacturing sector, which continues to play a crucial role in the nation’s economic stability.

Dan Wang from Hang Seng Bank observed that the economy could compensate for a significant loss in the housing market through industrial investment and manufacturing. This showcases the strength of the Chinese economy’s organisation.

Fixed Asset Investment Grows 4.2%, Real Estate Down 9.8%

Fixed asset investment grew by 4.2% year-on-year from January to April, slightly below the forecasted 4.6%. Meanwhile, the real estate sector continues to struggle, with a 9.8% year-on-year decline in investment over the same period. The ongoing slump in the real estate market has prompted local governments to ease housing purchase restrictions in many cities.

Liu Aihua from the NBS emphasised that April figures were impacted by the May 1 Labor Day holiday and the high base from last year. Additionally, she noted that the real estate sector continues to undergo a period of adjustment.

The unemployment rate in China stood at 5% in April, indicating a stable job market. However, new loan data for April was the lowest in two decades, signalling caution among lenders and borrowers alike.

Exports Grow 1.5%, Imports Surged 8.4% in April

In April, China’s exports grew by 1.5% year-on-year, while imports surged by 8.4%, indicating stronger domestic demand than global demand. This aligns with the EU Chamber of Commerce’s observation that increasing domestic demand is more crucial for foreign businesses than industrial investment.

Consumer prices saw an increase in April, whereas factory prices experienced a decline. Additionally, China launched a new bond issuance programme starting on Friday, intended to fund strategic projects over the next six months, with an expected economic impact by the first half of next year.

Real Estate Slump Prompts New Housing Policies in China

The real estate sector remains in a prolonged slump. In response, local governments have introduced new measures, including purchasing homes for affordable housing. Further details on housing policies are expected to be announced at a press conference on Friday afternoon.

China’s GDP grew 5.3% year-on-year in the first quarter, surpassing the forecasted 4.6%. The 2024 growth target is set at 5%. In terms of lending rates, a recent survey revealed that 82% of respondents expect rates to remain unchanged, while a minority predict rate cuts. The one-year Loan Prime Rate (LPR) stands at 3.45%, and the five-year LPR is at 3.95%.

Yuan of China Down 1.8% YTD, Analysts Urge Economic Measures

The Chinese yuan has depreciated by 1.8% year-to-date. Analysts from Citi emphasise the need for further property de-stocking efforts, timely RRR/LPR cuts, and initiatives like equipment upgrades and durables trade-in to revive credit demand.

Reflecting on the broader economic outlook, the NBS noted that major indicators such as industry, exports, employment, and prices improved overall, with new driving forces maintaining rapid growth.

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