Diverging economic recovery in China: Factory output surges while retail sales lag

China’s industrial production exceeded expectations in April, growing by 6.7% year on year, according to data from the National Bureau of Statistics. This beat economists’ forecasts of 5.5% and marked a significant improvement from the 4.5% growth seen in March. However, the picture was not as rosy for retail sales, which only grew by 2.3% from a year earlier, falling short of the expected 3.7% and declining from the 3.1% growth in March.

The disparity between industrial production and retail sales indicates that weak consumer sentiment is hindering the recovery of the Chinese economy, the world’s second-largest. To address this issue, authorities may need to ramp up efforts to stimulate domestic consumption.

In response to the economic challenges, the Chinese government is taking steps to bolster growth. The People’s Bank of China is set to sell Rmb1tn ($140bn) of ultra-long bonds to support economic growth. Additionally, the State Council announced a meeting to address issues in the housing sector, which has been struggling despite previous initiatives to support debt-laden property developers.

The mixed signals from China’s economy have also impacted the stock market, with the CSI 300 index edging down and the Hang Seng Mainland Properties index fluctuating. Property prices in first-tier cities have fallen, adding to the challenges faced by policymakers.

Furthermore, trade tensions with the US and the EU continue to pose a threat to China’s economic stability. Both the US and the EU have raised concerns about unfair trade practices, leading to tariff increases and investigations into Chinese industries. China has warned of a resolute response to these actions, highlighting the ongoing challenges in the global trade landscape.