DBS Group Research economists led by Mo Ji assess recent China data, highlighting strong external trade but subdued domestic demand across consumption, investment and credit. They note resilient exports, soft industrial production and weak Fixed Asset Investment, especially in property. Inflation is picking up via PPI while CPI lags. DBS now expects no 1Y LPR cuts over the next 18 months, with policy support shifting toward fiscal measures.

External strength versus internal weakness

"Although the US–China trade talks offered optimism over the trade outlook, the broad-based weakness in domestic demand remains a concern. Consumption, production, investment, and credit growth all stayed subdued in April. Higher energy prices and supply chain disruptions posed additional headwinds to growth."

"External trade momentum remained robust. Exports grew from 2.5% yoy in March to 14.1% in April, despite a moderation in March amid Middle East-related disruptions. Strength was driven primarily by non-US trading partners, while imports accelerated to 25.3% yoy, as manufacturers increased purchases of intermediate goods in response to stronger export orders."

"Investment sentiment remained tepid. FAI reversed from the brief rebound of 1.7% yoy ytd growth in 1Q to a contraction of 1.6% in April. Private investment extended its decline to 5.2% YoY."

"We now expect no cuts to the 1Y LPR over the next 18 months. Like other central banks including the Fed, surging energy prices reduce the likelihood of near-term monetary policy easing. The government is likely to expedite fiscal support to bolster growth."

"A resilient external sector and improving trade relations with the US could help stabilise overall growth momentum. Policymakers appear comfortable maintaining a targeted easing approach rather than pursuing broad-based rate cuts."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)