ChinaPulse: April Data Surprises to the Downside

China's April economic data disappointed as a sharp slowdown in retail sales and fixed asset investment overshadowed strong tech-driven exports. Geopolitical risks from the Iran war and weak domestic credit appetite continue to weigh on the growth outlook.

Key Takeaways

• 1.China's domestic demand weakened significantly in April with retail sales growth slowing to 0.2% yoy and fixed asset investment contracting by 1.6% yoy.
• 2.Strong external demand for tech and AI-related products led to 14.1% export growth, but this was insufficient to offset the domestic consumption drag.
• 3.The Iran war and the blockade of the Strait of Hormuz are posing severe non-linear risks to China's economy via energy supply disruptions and high input costs.

Table of Contents

• Key Points:
• April retail sales declined, a big negative surprise
• Unexpected contraction in April FAI despite government fiscal support
• Property market not yet stabilized though tier-1 cities are doing better
• Tech IP outperformance not enough to offset the drag from other sectors (e.g., petrochemical-related)
• Tech-driven exports growth to sustain at least in near term
• PPI upward momentum sustained in April with modest pass-through to CPI
• Further weakness in monetary data reaffirmed the need to stimulate domestic demand
• USD/CNY: Stay broadly range-bound in near term, with a slight downside bias towards the end of Q2
• CHINA MACRO FORECAST IN THREE SCENARIOS
• USD/CNY FORECAST IN THREE SCENARIOS
• SUMMARY OF CHINA ECONOMIC DATA

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