Chinese industry rebounded in April from record falls but the country’s economic recovery remains fragile after the latest threat from Donald Trump strained relations further.
Industrial production rose 3.9 per cent year-on-year in April after collapsing 13.5 per cent in the January-February period during the coronavirus outbreak, the National Bureau of Statistics said on Friday.
Fixed-asset investment and retail sales continued to fall but at a slower pace. Fixed-asset investment was down 10.3 per cent over the first four months of the year, compared with a 16 per cent decline in the first quarter. April retail sales fell 7.5 per cent year-on-year.
The release of the figures came just hours after President Trump threatened to “cut off the whole relationship” with China in retaliation for Beijing’s alleged mishandling of the early stages of the pandemic.
Earlier this week, the US government’s main pension fund halted plans to invest in Chinese stocks after pressure from administration officials.
While China’s economy has shown signs of recovery, analysts have predicted that Beijing would unleash stronger stimulus measures when the National People’s Congress, its rubber-stamp parliament, meets next week for its delayed annual session.
Bo Zhuang, chief China economist at TS Lombard, said he expected a “stage-two stimulus” to be revealed at the NPC to counter “unprecedented challenges posed by the slower than expected recovery of domestic demand, rising unemployment, a deep global recession and continued US-China tensions”.
Yet most analysts predicted that China’s stimulus measures would fall short of recent emergency monetary and fiscal packages adopted in the US and Europe.
“Household consumption remained the weakest link but it also improved substantially in April,” said Louis Kuijs at Oxford Economics. “We expect China’s stimulus to remain relatively modest but it should add support to the domestic demand recovery.”
In an article published in the People’s Daily on Thursday, Liu Kun, the finance minister, promised a “more proactive” fiscal policy response that is expected to include a larger budget deficit and bigger bond issues by the central and local governments to boost economic activity.
In his comments on Thursday, Mr Trump suggested again that his administration might ban Chinese listings in the US.
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“Trump has refused to follow through on [delisting Chinese companies] multiple times,” said Derek Scissors, a China expert at the American Enterprise Institute in Washington.
“If it was eager [the Trump administration] might do something truly radical like require Chinese firms listed here to actually obey US disclosure [rules]. The tiny [pension fund] step went through, finally, because it doesn’t cost anyone with any influence any money,” Mr Scissors added.
Minxin Pei, a sinologist at Claremont McKenna College in California, added that the consequences of Mr Trump’s threat to “cut off” relations between the world’s two largest economies “would be horrendous”.
“Trump is just trying to be macho,” Prof Pei added. “If you tally up all the threats he hasn’t followed through on, it would be a very long list.”