China's April data reveals signs of weak economic performance
**Abstract**
Disappointing data from China’s manufacturing and property sectors has revealed new signs of economic weakness, raising concerns about the government's ability to maintain growth. Economists had anticipated a sharp slowdown in the first quarter, as this could signal a need for more aggressive policy support. However, recent figures have shown that the real estate downturn is spilling over into other areas of the economy, including industrial output, retail sales, and investment in machinery and land.
Liu Ligang, an economist at ANZ Bank, emphasized that the current situation is far more serious than previously thought. He pointed out that China’s economic activity has not only failed to recover but may still be at a low point. If the government remains committed to its 7.5% annual growth target, these numbers serve as a clear warning, urging policymakers to take bolder actions.
In response, several local governments have started to ease property market regulations, such as extending housing purchase privileges to nearby residents and relaxing rules for foreign buyers. The real estate sector plays a crucial role in the Chinese economy, with indirect costs like furniture and property management fees accounting for around 25% of GDP. A decline in this sector can trigger a chain reaction across the economy.
Wang Tao from UBS highlighted that real estate risks are now the most pressing issue for China’s economy. According to the National Bureau of Statistics, residential sales fell by 9.9% year-on-year in the first four months of the year, reaching 1.53 trillion yuan—down from 7.7% in the first three months. Meanwhile, real estate investment grew by 16.4%, slightly slower than the 16.8% recorded in January-March.
As banks continue to tighten mortgage lending, demand for homes has cooled in many cities. Buyers are waiting for further price cuts, leading to a more cautious market environment. Analysts believe that with weak industrial output, investment, and real estate data expected in the second quarter, the central bank may be forced to cut the reserve requirement ratio for commercial banks.
Despite the government’s “micro-stimulus†measures in February—such as tax cuts for small businesses and increased infrastructure spending—some experts argue that these efforts are insufficient to counteract the underlying economic challenges. Wang Tao from UBS noted that the latest data suggests these policies have yet to deliver meaningful results.
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