China’s April data showed the effects of the heightened US-China trade war. Industrial production growth slowed to 6.1% year-on-year, slightly above expectations, with a monthly rise of 0.2%.

Retail sales growth dropped to 5.1% year-on-year, lower than anticipated, with monthly growth also slowing. The data indicated challenges in domestic demand, influenced by a struggling property sector and low confidence levels.

Fixed Investment Trends

Fixed investment growth decelerated to 4.0% from January to April. In the property sector, annual investment and residential sales continued to contract. Despite these trends, urban jobless rate showed a slight improvement, decreasing to 5.1%.

Future growth might rebound with the recent US-China truce, reducing bilateral tariffs. It is expected that China will cut loan prime rates by 10 basis points soon, following previous reductions. Though growth risks have increased, trade-related uncertainties persist.

The latest economic figures from April help paint a direct picture of how rising tensions between Beijing and Washington have strained domestic output and spending momentum. Industrial production edged up by a modest 0.2% over the month, clocking in at a 6.1% year-on-year pace—just above estimates, but without any sign of renewed strength. The lift likely came from narrow sectors, possibly bolstered by state-driven demand rather than any broad-based industrial pickup.

Retail performance was more concerning. Annual growth slowed abruptly to 5.1%, missing projections, and monthly gains followed a similar downward path. Lower household sentiment, partly triggered by weakness in the property market, appeared to dampen consumer activity once again. April’s retail miss reflects how domestic demand remains hampered—not only by structural weight from the property system, but also by the lingering aftereffects of disrupted confidence cycles.

Fixed asset investment slowed to 4.0% over the first four months of the year, slipping further from earlier performance. Most worrying is the real estate drag—downward pressure in both development and sale volumes continues to weigh on business activity, leaving policymakers cornered between stabilisation efforts and constrained stimulus options. Residential construction and wider real estate metrics are plainly underdelivering. Lower land sales and weaker project starts suggest the capital expenditure cycle will likely soften further unless new credit channels are opened.

Urban Employment Context

Job data held relatively firm, at least on the surface. The registered unemployment rate slipped to 5.1%, suggesting some resilience in urban employment. But beneath that, underemployment and wage stagnation remain potential threats to consumer-led recovery.

Given these pressures, market participants are watching upcoming rate decisions closely. A cut to the loan prime rate—widely expected at 10 basis points—would mark a continuation of Beijing’s monetary support stance. We’ve already seen cautious steps taken in that direction. However, with fiscal space tightening and debt sensitivities rising, the question is how long these tools can carry the weight alone.

Although the recent pause in tariff escalation points toward less friction in trade channels, volatility around export policy remains elevated. We cannot assume that bilateral de-escalation translates into immediate uplift. Instead, we need to account for a time lag between policy softening and measurable economic payoff. That means nearer-term data may still be noisy, even if forward-looking conditions improve slightly.

This is not the backdrop for aggressive positioning. Price sensitivity around rate instruments could rise as traders reassess the path of stimulus and policy recalibration. If credit easing proves deeper than expected, we may see temporary risk appetite build—but with ongoing weakness in both demand and investment, any rally could be both narrow and short-lived. We should keep our exposure flexible, especially near key data prints and central bank remarks.

Watching capital flows and interest rate curves in parallel will be key. So far, shifts have been moderate. But with export dynamics far from stabilised, and domestic levers under pressure, fixed income may begin moving on expectation rather than evidence. It would be premature to adopt directional bets based purely on this month’s numbers. Instead, the timing and communication of any further easing will matter more than the size of the cuts themselves.

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