#TradeWarEases#ChainaEconomy #USChinaTariffs

Hello, crypto enthusiasts and everyone following global finance! A little update on the economy of China.

Let's take a look at what is happening in the second largest economy in the world, because it knows how to throw surprises. According to fresh data from the National Bureau of Statistics (NBS) of China for April 2025, the recovery of the economy of the Middle Kingdom... well, let's say, looks like a bumpy road. The NBS even stated directly that the foundation for this recovery "needs further strengthening" amid external uncertainty. Agree, it doesn't sound like a victory march, but rather like a cautious movement on thin ice.

So what specifically did April show? Let's delve into this economic "mix."

Where are the bright spots?

Let's start with the good news. Industrial production grew by 6.1% year-on-year. This, by the way, turned out to be better than analysts' forecasts (they expected 5.5%). It seemed that the factories were smoking, everything was fine! However, there is a nuance: in March, the growth was even more vigorous – a full 7.7%, which was the best figure in almost four years. It turns out the pace has slightly slowed down after the spring sprint. Production remains a strong point of the Chinese economy, especially considering the growth in investments in manufacturing (+8.8% from January to April). But the slowdown may indicate that the peak of the rebound has passed, or this is just normalization after explosive growth.

Another modest plus is the labor market. The urban unemployment rate has slightly decreased to 5.1% compared to 5.2% in March, reaching a four-month low. Not a revolution, but at least some stability, and stability in the labor market is always a good sign for consumer confidence (in theory).

And where is the Achilles' heel?

Now to what is causing concern. Here, the spotlight falls on... you, our dear readers, or rather, your Chinese consumption counterparts. Retail sales grew by only 5.1% in April, which turned out to be BELOW forecasts (5.5%) and worse than in March (5.9%). This is perhaps the main alarming news. People are simply not in a hurry to part with their money. Why? Economic uncertainty, sluggish income growth (well, this isn't just a problem in China, right?) and fears about future trade wars certainly do not encourage people to rush to stores or order online.

Look at the details: sales of tobacco and alcohol, beverages, clothing, footwear, even cars have slowed down. Indeed, there are also unexpected growth leaders: household appliances (+38.8%!), jewelry (+25.3%), stationery (+33.5%). It seems someone finally upgraded their fridge, bought some gold, and got cozy while working remotely. And construction materials saw a sharp increase after a decline (+9.7% versus -0.1% in March), which may be related to government efforts to revive the sector (or simply a seasonal factor). But the overall picture – consumer demand is still unconvincing.

Another "anchor" is, of course, the real estate sector. Real estate investments from January to April fell by 10.3% compared to last year. This is just a weight on the legs of overall economic growth. While investments in infrastructure and manufacturing are growing, total investments in fixed assets (which include real estate) increased by only 4.0%, again below the forecast. If we remove real estate from the equation, the investment picture looks much healthier (+8%), which clearly shows the scale of the problem in the construction sector.

External Factors and the Market

We must not forget about external uncertainties. Yes, in early May, Washington and Beijing agreed to temporarily (for 90 days!) roll back most tariffs to give negotiations a chance. This is certainly better than escalation. But a "temporary rollback" is not "peace," it is a "truce." China describes the negotiations as "good," but remains vague about future steps, while former President Trump intrigues with hints of a possible conversation with Xi. On top of that, China has imposed anti-dumping duties on plastic imports from the US, EU, Japan, and Taiwan. The game continues, just with different pieces being used.

How are the markets reacting to all this? The offshore yuan (CNH) is behaving cautiously, trading around 7.21 per dollar, in a narrow range and not far from two-month lows. It is under pressure from weak internal data and trade caution, but at the same time receives support from... the weakness of the US dollar itself (after an unexpected downgrade in credit rating and rising expectations for a Fed rate cut). In other words, the yuan is currently in a state of a "tug-of-war" between domestic problems and external support.

Chinese stock indices, such as the Shanghai Composite and Shenzhen Component, reacted with a decline, marking the third day of decreases. Investors are clearly not thrilled with the mixed data and ongoing trade uncertainty. Stocks of giants like Kweichow Moutai, BYD, and Foxconn were among the leaders of the decline. The market is voting with its money, and so far this voice sounds uncertain.

What's next? The response from the PBOC?

What can Beijing do to stimulate the economy? The main tool now seems to be monetary policy. The market is eagerly awaiting decisions from the People's Bank of China (PBOC) regarding key lending rates (LPR). It is expected that both the one-year and five-year LPR will be lowered by 10 basis points. This is a standard response from the central bank to slowdowns and weak demand – an attempt to make loans cheaper for businesses and households (especially mortgages through the five-year rate) to encourage spending and investment.

Conclusions for investors

So, the picture is as follows: the Chinese economy is recovering, but unevenly. The industry is holding up well (although the pace has slowed), the labor market is stabilizing, but consumption and the beleaguered real estate sector continue to struggle significantly. The external backdrop remains unpredictable, despite temporary truces.

Why is this important for you if you invest, including in crypto?

* Global Influence: China is a huge consumer of raw materials and producer of finished goods. Its economic health directly impacts global trade, commodity prices, and sentiment in global markets. A faltering recovery in China could become a brake on global growth.

* Market Sentiment: Uncertainty around the Chinese economy, trade frictions, and the reaction of the stock market as a whole affect investors' risk appetite across all markets, including cryptocurrency markets. "Risk-off" sentiment in Asia may spread further.

* PBOC Policy: The expected rate cuts from the PBOC are a signal that authorities are ready to stimulate the economy. Monetary easing in a large economy can have implications for global liquidity and exchange rates, which indirectly impacts crypto.

In general, the April data from China is a signal that it is too early to relax. The recovery is ongoing, but it is fragile and vulnerable. Investors should closely monitor the next batches of statistics, the development of trade negotiations, and, of course, the actions of the People's Bank of China. The road to sustainable growth is still ahead, and it seems it won't be boring.

Disclaimer: This article contains analytical reflections and is not a financial recommendation. Making any investment decisions should be based on your own analysis, research, and risk assessment.