China: April activity overshadowed by tariff war - Standard Chartered

Activity data points to softening momentum from Q1, but industrial production has held up. Frontloaded exports and macro policy implementation to continue to support growth in Q2. Property market remains the key drag for the domestic economy. Tariff truce lowers likelihood of additional stimulus, in our view, but uncertainty remains high in H2, Standard Chartered's economists report.

Resilience tested

"Overall, April data showed resilience amid the tariff war. Industrial production remained solid, while retail sales and fixed asset investment came in slightly below expectations. Although April data suggests slowing momentum from Q1, activity has held up well; this bodes well for c.5% growth in Q2 (vs 5.4% y/y in Q1) on a favourable base effect."

"Frontloaded exports and faster stimulus deployment have likely contributed to this resilience. Overall, exports held up well in April. Data shows strong growth in retail sales of goods subsidised as part of the government's consumer goods trade-in programme and solid expansion in infrastructure and manufacturing investment, supported by frontloaded government bond issuance. These factors likely will remain supportive for growth in Q2."

"However, US tariff uncertainty remains and China's housing market is still a drag. The recent tariff reduction has eased pressure on China's growth outlook, thus lowering the likelihood of additional stimulus. The stimulus package announced at the National People's Congress (NPC) meeting in March, if fully implemented, should be able to largely offset the impact of tariffs. The Politburo meeting in July likely will re-evaluate the growth outlook based on trade negotiation progress and assess if further stimulus is needed."