China relies heavily on its industrial sector while its economic recovery shows an imbalance with manufacturing booming versus slowing consumer activity, making the country more vulnerable to international trade disputes, according to Bloomberg.
According to the agency, the economic improvement in China shows a significant imbalance between consumption rates versus export rates, as the growth in consumer spending slowed to only 2.3% last April – the lowest level since 2022 – while industrial production witnessed a strong increase, as It rose to an unexpected 6.7%.
This gap reflects the recovery, which relies heavily on the industrial sector and export-based growth, a sector that now faces great risks due to increasing trade tensions, especially with the United States and Europe, as it is the sector most vulnerable to sanctions.
Escalating global trade tensions
Ongoing trade disputes – exacerbated by the imposition of US tariffs on Chinese goods, including a 100% tariff on electric cars – are putting additional pressure on China’s export-driven recovery strategy, according to Bloomberg.
This Chinese focus on the industrial and export sector has led to major international disagreement, with accusations from the United States and the European Union that China’s policies are harming their domestic industries.
Chinese government response to economic challenges
In response to existing economic challenges, the agency said the Chinese government is taking proactive steps, including removing minimum mortgage rates and offering lower down payment rates to homebuyers.
Moreover, the issuance of special sovereign bonds worth 1 trillion yuan ($141 billion) aims to boost infrastructure spending, which could stimulate broader economic growth, the agency says.
However, despite these efforts, consumer confidence remains fragile according to Bloomberg. For example, car sales fell by 5.6%, the largest decline in nearly two years, amid a price war between automakers.
The real estate sector is in distress
Amid the faltering real estate market, Beijing announced new measures aimed at revitalizing it.
These measures, according to Bloomberg, include easing regulatory restrictions on borrowers and pledging public funds to purchase homes, which pushed Chinese real estate stocks higher.
