Deterioration of Chinese economic dynamics could cost the world new trade wars - intelligence

In April, China's economy slowed down significantly: industrial production growth declined, retail sales nearly stalled, and investment contracted. The weakest dynamics are observed in the automotive industry, real estate, and domestic consumption. This was reported by the Foreign Intelligence Service, according to UNN.

April data from China's National Bureau of Statistics turned out to be worse than even cautious analysts expected. Industrial production grew by only 4.1% year-on-year compared to 5.7% in March – the weakest result since July 2023. Retail sales almost came to a standstill: plus 0.2% after 1.7% a month earlier. Domestic car sales collapsed by 21.6% – marking the seventh consecutive month in the red. Capital investment decreased by 1.6%

The PRC's failure is explained by three structural factors that have been maturing for a long time.

First – energy. The conflict surrounding Iran blocked the Strait of Hormuz and disrupted the logistics of oil supplies. Chinese oil refineries, primarily state-owned ones, were forced to cut processing volumes. For an economy that depends almost entirely on imported oil, this is a direct blow to industrial production.

Second – real estate. The sector is dragging down all domestic demand. Developers are mired in debt, housing prices are falling, and construction is shrinking. The banking sector is nervous. Local budgets, which for decades lived off land sales, are now patching holes. Real estate was long the locomotive of Chinese growth – now it is a brake.

Third – the consumer, who does not want to spend. Chinese households are increasing savings and avoiding new loans. The car market, housing, durable goods – the picture is the same everywhere. Traditional stimuli through lending do not work in such a situation: people simply do not take out loans.

Beijing is reacting differently than the market expected. The new five-year plan, adopted in March, focuses on energy security and technological independence rather than large-scale injections into consumption. The authorities are deliberately avoiding a repeat of the credit-and-construction stimulus model that the country has already experienced and which left behind a mountain of debt.

The price of such restraint is outward trade aggression. If domestic demand is weak and Beijing is in no hurry to stimulate it, the only remaining option is to compensate for the decline through exports. Supporting manufacturers, pressuring foreign markets, and increasing presence where there are still buyers. Therefore, the US and the EU view the PRC's excess production capacity as a threat to their own industries. New trade conflicts in this scenario are only a matter of time

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