China: growth, but fragile

China left its benchmark lending rates unchanged on April 20, signaling that stronger first-quarter growth has eased pressure for a fresh round of stimulus. (cnbc.com) The People’s Bank of China held the one-year loan prime rate at 3.0% and the five-year rate, the reference for mortgages, at 3.5%. It was the 11th straight month without a change, and a Reuters survey of 20 market participants had expected exactly that outcome. (usnews.com) The pause followed first-quarter data showing gross domestic product up 5.0% from a year earlier and 1.3% from the previous quarter, to 33.42 trillion yuan. Beijing’s full-year target is 4.5% to 5.0%, the lowest target range since the 1990s. (english.scio.gov.cn) The stronger headline numbers came with firmer prices. China’s factory-gate prices rose 0.5% in March from a year earlier, the first increase in more than three years, while consumer inflation eased to 1.0% in March after hitting 1.3% in February. (cnbc.com) Growth inside China is splitting into fast and slow lanes. High-tech manufacturing rose 12.5% in the first quarter, digital product manufacturing grew 11.2%, and integrated-circuit output jumped 49.4%. (english.scio.gov.cn) Artificial intelligence is one of the pockets still drawing money. Bloomberg reported on April 19 that cheap Chinese models are winning users overseas and boosting companies tied to “tokens,” the data units large language models process, helped by low-cost electricity and a crowded field of domestic model developers. (bloomberg.com) The older drag has not gone away. Real-estate investment fell 11.2% in January through March from a year earlier, with residential investment down 11.0%, extending the slump in the sector that once drove household wealth and local-government revenue. (stats.gov.cn) That leaves policymakers balancing sturdier factory output against weak credit demand at home. Reuters cited DBS saying officials are likely to stick with targeted easing rather than broad rate cuts, while Societe Generale said strong first-quarter growth could keep Beijing from adding more stimulus at the late-April Politburo meeting. (usnews.com) For now, China’s message is that the economy is growing fast enough to wait. The risk is that a recovery led by factories and selective AI winners still has to carry a property market that remains in retreat. (cnbc.com)