Chinese economy shows new weakness in retail sales difficulties

BEIJING: The Chinese economy has shown new signs of weakness in April. The slowest growth in retail sales in 16 years has highlighted the leaders' task of boosting domestic demand while leading a painful trade war with the United States.

For years, the authorities have been trying to shift the world's second-largest economy, now dependent on state investment and exports, to a more stable economy driven by the huge Chinese consumer army, the deadlock over tariffs reinforcing the need for such a change.

But the latest figures released Wednesday, May 15, show that retail sales rose 7.2% last month, far from the 8.4% reported by economists in a Bloomberg News survey and a significant drop compared to March.

The figures from the National Bureau of Statistics (SNB) represent the worst pace since 2003, at the height of the SARS crisis.

The bureau also indicated that growth in industrial production slowed sharply, rising 5.4%, while capital investment rose 6.1% in the four months to April. Both estimates missed Bloomberg.

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These readings fueled the assumption that the authorities would unveil a new set of measures to give a new impetus to the economic situation – after taking stimulus measures in recent weeks following signs of economic recovery – the Shanghai composite index surged more than 1% on Wednesday.

Beijing has rolled out massive tax cuts and other measures this year to revive the economy and mitigate the effects of the trade war that saw the United States impose tariffs on hundreds of billions of dollars in Chinese products, raising concerns for exporters.

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However, while leaders will want to prevent the economy from taking a hard blow, Capital Economics' Julian Evans-Pritchard was skeptical about what they would do.

"Given that the size of the stimulus package will likely remain lower than previous slowdowns, we do not expect a solid recovery," he said.

On a more positive note, Betty Wang, an economist at ANZ Bank, said in a research note that real estate investment had picked up over the first four months of the year thanks to "a big leap in before developer financing conditions, "with bank loans, down payments and mortgages all grow at a faster pace.