In April, China’s economic activity continued to display extraordinary resilience. This remarkable performance occurred despite the continued disruptive effects of the U.S.-China tariff war. The latest data indicates a softening momentum compared to the first quarter of the year, yet essential sectors such as industrial production and exports have demonstrated stability. Many analysts have pointed out that these trends could act as strong tailwinds for China’s growth outlook in the second quarter.
It was arguably the most important as preliminary figures released by Beijing indicate that China’s growth rate for the first quarter has jumped to 5.4% YoY. Expectations for the second quarter are greater than 5%. Positive base effects and frontloaded exports are fueling this expected growth. They provide the legislative glue that keeps the momentum patently moving forward, even in the face of overwhelming external pressures. As a result, recent tariff reductions took the edge off China’s economic downturn. Due to prudent actions taken, the likelihood of requiring extensive stimulus measures is lower.
China’s industrial production has proven resilient, reflecting the country’s ability to adapt under pressure. Support production level remained high, which played a significant role in the state’s overall economic stability. Additionally, China’s exports surprise on the upside in April suggesting that the international demand is still holding up well.
Yet, analysts are warning that all signs don’t necessarily lead to unqualified expansion. Meanwhile, the housing market has become a notable drag on broader economic performance. “US tariff uncertainty remains and China’s housing market is still a drag,” an economist noted. The housing sector’s struggles mirror larger fears about the level of domestic consumption and investment.
Yet, April’s activity data indicates to us that although momentum is definitely softening compared to Q1, there still appears to be a base for growth. “Overall, April data showed resilience amid the tariff war,” remarked an economic analyst. Resilience has been bolstered by frontloading exports and expedited deployment of stimulus. Together, this moats makes them protected from external economic shocks.
As China continues to address these challenges, the early cut to tariffs offers some optimism for a better economic outlook. That lowered pressure provides a much more stable picture moving forward. This relative stability reduces the need for additional government stimulus surprises that would make it more difficult to steer the economy.
The resilience we see in April’s rapid recovery is even more impressive and another positive sign for China’s growth prospects in Q2. Analysts agree that the positive base effect is going to be the major factor determining economic performance over this period.