China's Industrial Sector Remains Resilient, Economic Indicators Give Mixed Results

Despite escalating trade tensions with the United States, China’s industrial sector displayed a stronger-than-anticipated performance in April. Factory output grew by 6.1 per cent year-on-year, data from the National Bureau of Statistics (NBS) revealed on Monday.

Although this marked a slowdown from March’s 7.7 per cent growth, the result surpassed the 5.5 per cent expansion predicted in a Reuters poll, suggesting that Beijing’s fiscal efforts may be softening the blow of the tariff conflict.

“April’s resilience is in part a result of ‘frontloaded’ fiscal support,” said Tianchen Xu, senior economist at the Economist Intelligence Unit, referring to accelerated government expenditure that likely provided a buffer.

Recent data on exports also beat expectations, attributed by economists to altered trade routes and increased purchases by countries shifting supply chains amid the US tariff environment, reported Reuters.

However, even with industrial output holding up, exports failed to register strong momentum. Xu pointed out, “Despite the rapid growth in industrial value-added, the export delivery value was nearly stagnant.” The comment underscored ongoing pressures, even as a temporary truce between Washington and Beijing brought a pause to further tariff escalation. The 90-day agreement to roll back most of the imposed tariffs has helped cool tensions that had previously disrupted trade networks and sparked concerns over a global slowdown.

At a press conference, NBS spokesperson Fu Linghui said, “China’s foreign trade has overcome difficulties and maintained steady growth, demonstrating strong resilience and international competitiveness.” He expressed optimism that the easing of trade restrictions would benefit global economic recovery and bilateral trade flows.

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Domestic Weaknesses Persist Despite External Gains

Although export-related industries showed signs of adaptation, the domestic picture remained mixed. Retail sales in April rose just 5.1 per cent, falling short of expectations and dipping from 5.9 per cent in March. The underperformance has been linked to weakening consumer sentiment and reduced spending, potentially triggered by tariff-related uncertainties.

The property sector also continued to struggle, with stagnant home prices and declining investment. In the commodities space, crude steel production dropped by 7 per cent from March levels, while crude oil refining activity decreased by 4.9 per cent month-on-month.

However, some targeted measures showed effectiveness. For instance, a government-backed trade-in initiative for consumer goods sparked a 38.8 per cent jump in home appliance sales.

The national unemployment rate edged down slightly to 5.1 per cent in April from 5.2 per cent the previous month, though anecdotal accounts indicated that some export-dependent factories  started sending workers home due to softening demand from the US market.

At the same time, concerns persisted over broader economic conditions. Deflationary trends, along with lacklustre bank lending figures, pointed to underlying fragility.

“We caution that the near-term growth strength is at the cost of payback effects later and believe more policy easing is necessary to stabilise growth, employment and market sentiment,” economists at Goldman Sachs wrote in a note.

China’s GDP rose 5.4 per cent in the first quarter, a result that exceeded market forecasts. Policymakers remain confident of hitting the full-year growth goal of around 5 per cent. Still, there’s growing awareness that external risks, particularly from lingering US tariffs—which still apply to about 30 per cent of Chinese exports—could jeopardize that trajectory.

Earlier this month, before the de-escalation in Geneva, China introduced stimulus measures including interest rate cuts and a liquidity boost. These actions reflect official concerns over the toll taken by the trade war on the broader economy. While the tariff rollback agreement has been welcomed, analysts remain cautious.

Julian Evans-Pritchard, head of China Economics at Capital Economics, noted, “The deal will provide some relief, but even if the tariff rollback proves durable, wider headwinds mean that we still expect China’s economy to slow further over the coming quarters.” He added, “We suspect that the trade war has made households more concerned about their job prospects and therefore more careful about their spending.”

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