Standard Chartered strategists note that China’s April data showed weaker domestic demand, with both consumption and investment slowing even as exports supported industrial production. They highlight that reflation is being driven mainly by global commodity prices and that the government is likely to accelerate fiscal implementation while US-China relations should remain broadly stable.

Domestic demand slows as exports hold

"Domestic demand weakened again in April, after Q1 growth beat expectations. Exports remained the brightest spot, exceeding market estimates and supporting industrial production (IP). However, both retail sales and fixed asset investment (FAI) growth decelerated notably, echoing the weakness in credit demand data released earlier."

"While reflation continued, we believe it was largely driven by surging global commodity prices amid the AI investment boom and the Middle East conflict."

"We had expected the Middle East conflict to have a more visible economic impact in Q2, and the first signs may have emerged in April."

"The government is likely to accelerate fiscal implementation in the coming months to stabilise investment, though the Middle East may remain a key source of uncertainty this year."

"We expect intermittent flare-ups to persist, but the implicit consensus on a managed truce should reduce the risk of a disruptive deterioration in US-China relations."

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