Overview

• While several key indicators accelerated in year-on-year terms in April, these measures were inflated by the impact of base effects – with April 2022 a particularly weak month given the COVID-19 lockdowns that severely impacted Shanghai and hit a range of other cities as well. When these were stripped away, the big picture is of an economy where domestic demand is still yet to fully recover. Overall, nothing in this month’s data has us changing our views – we see China’s economy expanding by 5.6% in 2023, 4.5% in 2024 and 4.8% in 2025.
• Growth in China’s industrial production accelerated in April – increasing by 5.6% yoy (around pre-pandemic trend rates of growth) – compared with 3.9% yoy in March. The impact of base effects was highly evident in automobile output – which rose by almost 60% yoy – while other major categories recorded more modest increases.
• Real fixed asset investment grew by 5.4% yoy in April (compared with 5.2% yoy in March). By sector, growth in investment remains driven by state-owned enterprises – with nominal investment rising by 8.3% yoy in April, while investment by private sector firms rose by just 1.2% yoy.
• China’s trade surplus was marginally larger in April, totalling US$90.2 billion (up from US$88.2 billion in March). This slight increase reflected a larger month-on-month easing in imports than exports. Import prices have shifted significantly in recent times – increasing strongly across much of 2022 but falling significantly in April.
• Real retail sales (deflated by consumer prices) soared in April – up by 18.3% yoy (from 9.8% yoy in March). However, these data were particularly impacted by base effects – real sales plunged almost 13% yoy in April last year. Consistent with weak inflation, this suggests that  the long awaited return of the Chinese consumer still has a way to go.
• New credit issuance rose strongly in the early months of 2023 – up by 21.3% yoy between January and April. Bank lending has been the key driver of this trend, increasing by 27.0% yoy to RMB 11.2 trillion. Growth in the outstanding stock of bank loans has primarily been driven by increased lending to households – reflecting mortgage lending that has underpinned the stabilisation of the property sector. However, it is worth noting that lending growth slowed substantially month-on-month in April. This continues to point to patchiness in China’s economic recovery.
• Recent efforts to ease monetary policy have focussed on increasing the quantity of money rather than the price – with the People’s Bank of China (PBoC) cutting the Reserve Requirement Ratio (RRR) in March, freeing up further funds for banks to lend. In contrast, the Loan Prime Rate – the main policy rate – has been stable since August 2022.

For further details, please see China’s economy at a glance (May 2023)