Recent data from China show domestic demand remains weak, according to ANZ Chief Economist, Greater China, Raymond Yeung — but not enough to threaten its annual growth forecasts.
Official Chinese retail data showed sales rose only 0.2 per cent year on year in April, the weakest growth seen since early 2023. Industrial production data also disappointed, as did fixed asset investment, which fell 1.6% per cent compared to the previous year in April, reversing gains seen in March.
“That tells us that domestic demand of China has been very weak,” Yeung told ANZ Institutional Insights. “And I expect some cyclical slowdown over the next few quarters.”
Part of the slowdown, according to Yeung, can be attributed to policymakers “pressing a brake” on activity to ensure smoother economic growth over 2026, meaning China’s growth forecasts should be unaffected.
“I do expect that this year China will be able to meet the target of growth between 4.5 per cent to 5 per cent,” Yeung said.
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Despite the poor domestic demand, China’s export demand has grown, Yeung said, with exports expanding by 14 per cent across the calendar year. That’s largely to the impact of technology, which Yeung expects to continue through 2026.
“[That] double-digit growth should be the backbone to support the economic expansion this year and also the next few years,” he said. “We all know that China is very, very good in AI, very, very good in robotics and machinery and all these things.”
Yeung said investment in automation would go some way to helping China solve its ongoing demographic issues, although the side effects will need to be managed carefully.
“The more the factories and even the service sector use automation… the higher the pressure will be on the job market,” he said.
The challenge for policymakers will be “how they can maintain or increase their job opportunities,” Yeung said, “especially for young people”.
Watch the video above to find out more.