China’s Retail Sales Fall Short: Why Stimulus Isn’t Boosting Demand While Industrial Output Thrives Despite Tariffs

China’s retail sales growth slowed in April, raising concerns about consumer spending in the world’s second-largest economy. According to the National Bureau of Statistics, retail sales increased by 5.1% compared to the previous year, missing the 5.5% growth analysts expected based on a Reuters poll. This figure was down from a 5.9% rise in March.

On a brighter note, industrial output grew by 6.1% in April, surpassing the expected 5.5%. This slower rise compared to March’s jump of 7.7% suggests that while the economy is resilient, challenges remain, particularly from the ongoing trade tensions with the U.S. The statistics bureau acknowledged the unstable external environment but stressed the need for stronger foundations for economic recovery.

Fixed-asset investment, which includes spending on infrastructure and property, rose only 4.0%, slightly below the 4.2% growth forecast. Unemployment showed a slight improvement, dropping to 5.1% from 5.2% in March. This change comes amid concerns about potential job losses due to tariffs imposed during the U.S.-China trade conflict.

As tariffs were put in place—145% on U.S. imports and 125% on Chinese goods—the effects on trade became apparent. In April, exports to the U.S. fell by over 21%, yet overall exports rose due to increased shipments to countries in Southeast Asia. This diversification highlights China’s efforts to maintain its trade balance despite external pressures.

Car sales, which are often seen as a barometer for consumer health, grew just 0.7%, a significant drop from the 5.5% rise in March. This stagnation occurs even as the government rolled out a subsidy program to encourage purchases.

The real estate sector faced ongoing challenges, with investment dropping by 10.3% year-on-year as it continued to adjust to previous overdevelopment.

Despite these setbacks, recent developments in U.S.-China relations offered some hope. A meeting between trade representatives led to a temporary rollback of tariffs, which sparked optimism among global banks. Some revised their growth forecasts for China upward, expecting the economy might still aim for a target growth of around 5%.

However, it’s crucial to note the weakening sentiment in manufacturing. A recent survey revealed a decline in new export orders—falling to a 16-month low—indicating that the effects of tariffs are still being felt by many businesses.

The People’s Bank of China (PBOC) is responding to these challenges with measures to support growth. A recent interest rate cut aims to boost economic activity.

Experts like Lisheng Wang from Goldman Sachs predict that while businesses are likely to increase shipments before tariff changes take full effect, there’s a risk of subsequent downturns if policies aren’t adjusted to ensure steady growth.

In summary, while China may navigate current economic hurdles with some success, cautious optimism seems necessary. Continued focus on domestic consumption and support for vulnerable sectors will be critical as the year unfolds.



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