Weak retail sales drag China’s economic momentum at Q2 start

China’s economy showed fresh signs of losing momentum at the start of the second quarter, with industrial production, retail spending and investment activity slowing sharply in April, raising concerns over the durability of the country’s recovery and opening a wider growth gap with India, which continues to benefit from resilient domestic demand and strong public investment.Data released by China’s National Bureau of Statistics (NBS) on Monday showed factory output in the world’s second-largest economy grew 4.1 per cent year-on-year in April, slowing from 5.7 per cent in March and missing market expectations of 5.9 per cent growth. The latest reading marked the weakest pace of industrial expansion since July 2023.
Retail sales, a key measure of consumer demand, rose only 0.2 per cent in April compared with 1.7 per cent in March, falling far short of forecasts and recording their weakest increase since December 2022. Economists said the data reflected continued weakness in household confidence and spending appetite amid persistent property market stress and rising external uncertainties linked to the Middle East conflict.The slowdown comes at a time when India is increasingly being viewed as a relatively stronger domestic-demand-driven economy. Unlike China, where exports and manufacturing continue to shoulder a large share of growth, India’s economic expansion has been supported by rising consumption, infrastructure spending, digitalisation and steady services-sector growth.

According to the latest projections from the International Monetary Fund and the World Bank, India is expected to remain the fastest-growing major economy in 2026, even as several large economies grapple with slowing demand and geopolitical disruptions.Analysts said China’s weakening consumption trends could indirectly benefit India by accelerating global supply-chain diversification and encouraging multinational companies to deepen investments in alternative manufacturing destinations. India has emerged as one of the key beneficiaries of the “China-plus-one” strategy, particularly in electronics, semiconductors, renewable energy components and engineering goods.“The divergence between China’s export-led growth and India’s domestic-demand-led expansion is becoming more visible,” economists said, noting that India’s comparatively stable consumption cycle has provided a cushion against external shocks.
China’s domestic automobile sales declined 21.6 per cent in April from a year earlier, extending losses for a seventh consecutive month and underlining continued caution among consumers toward big-ticket purchases. Fixed-asset investment also contracted 1.6 per cent during the first four months of 2026, reversing growth recorded in the January-March period and reflecting weakness in construction and industrial activity.While exports remained relatively resilient as manufacturers rushed to fulfil overseas orders tied to artificial intelligence-related industries and inventory stockpiling, economists warned that higher energy prices stemming from the Iran conflict could squeeze factory margins further and weaken consumer purchasing power.
The property sector, a long-standing drag on China’s economy, remained under pressure as real estate investment continued to decline, though new home prices showed tentative signs of stabilisation after government support measures.Market experts said Beijing may refrain from announcing major stimulus immediately and could wait for second-quarter GDP data before reassessing policy priorities. However, slowing growth and sticky inflation could complicate policy decisions in the months ahead.
The latest figures also arrived shortly after U.S. President Donald Trump concluded his visit to China, where both countries agreed to expand agricultural trade and address certain tariff and market-access issues. Still, analysts said the visit produced limited breakthroughs on broader trade and investment concerns.For India, economists believe the evolving global environment presents both opportunities and risks. While softer Chinese demand could affect regional trade flows and commodity markets, India may continue attracting global capital and manufacturing investments as companies seek diversified supply chains and stable long-term growth markets.India’s rising prominence in global manufacturing, coupled with ongoing infrastructure expansion and policy support for domestic production, has increasingly positioned the country as a key alternative growth engine in Asia amid China’s uneven recovery.

(Business Correspondent)