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China’s Industrial Output Rises 6.7% in April as Manufacturing Gathers Pace

China’s industrial output grew by 6.7% year-on-year in April, a significant increase from the 4.5% growth recorded in March. This robust growth, as reported by the National Bureau of Statistics (NBS) on Friday, exceeded analysts’ expectations of a 5.5% rise, indicating a strengthening recovery in the manufacturing sector.

Surge in Industrial Output

In April 2024, China’s industrial output surged by 6.7% year-on-year, a significant increase from the 4.5% growth recorded in March. This robust performance surpassed the 5.5% growth anticipated by analysts in a Reuters poll. The National Bureau of Statistics (NBS) noted that the acceleration indicates a gathering pace in the manufacturing sector’s recovery, bolstered by improving demand and production activities.

Sluggish Retail Sales

Contrasting the industrial boom, retail sales—a critical gauge of consumer spending—rose by a modest 2.3% in April, down from a 3.1% increase in March. This figure fell short of the 3.8% growth forecasted by analysts, reflecting ongoing challenges in boosting domestic consumption despite various government efforts to stimulate spending.

Fixed Asset Investment Trends

Fixed asset investment in China expanded by 4.2% in the first four months of 2024 compared to the same period in 2023. This growth was slightly below the expected 4.6% rise and marked a deceleration from the 4.5% increase observed in the first three months of the year. This slowdown indicates cautious investment sentiment amid broader economic uncertainties.

Mixed Economic Indicators

Earlier economic data for April painted a complex picture. While China saw a return to growth in exports and imports following a contraction in March, consumer prices continued to rise for the third consecutive month. On the financial front, new bank lending dropped more than expected from the previous month, and broad credit growth hit a record low, suggesting potential strains in the financial system and the need for further policy interventions.

Ambitious Growth Targets

The Chinese government has set an ambitious economic growth target of around 5% for 2024. The economy expanded by a faster-than-expected 5.3% in the first quarter, reflecting resilience in the face of global economic challenges. However, the mixed data from April underscore the complexity of sustaining this growth momentum.

Special Treasury Bonds for Economic Stimulus

In response to economic pressures, China commenced the issuance of 1 trillion yuan ($138.17 billion) in ultra-long special treasury bonds with tenors ranging from 20 to 50 years. These funds are intended to stimulate key sectors of the economy, providing much-needed support to achieve the government’s growth objectives.

Ongoing Property Sector Challenges

The property sector, accounting for a significant portion of China’s economy, continued to struggle. Property investment fell by 9.8% year-on-year in the January-April period, following a 9.5% decline in the first quarter. This sector has been under pressure due to a regulatory crackdown aimed at curbing excessive leverage and speculation.

To mitigate these issues, local governments in cities like Hangzhou and Xi’an have recently lifted home purchase curbs, aiming to rejuvenate the housing market and boost sales.

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