China: Domestic demand is losing steam

Activity indicators suggest that economic growth generally slowed in China last month, according to Oxford Economics. In sequential terms, industrial production continued to see steady growth, but fixed asset investment momentum eased, while household consumption fell outright.

Slower growth momentum in April points to downside risk to Oxford’s growth forecast for this year. The expected growth is to rotate toward corporate investment and household consumption, away from real estate and infrastructure investment. But there are still substantial headwinds, especially around the household sector.

Continued weak domestic demand momentum would create a dilemma for policymakers, as it will lead to pressure to pursue a more pro-growth macro policy that could increase financial risks and leverage, according to Oxford.

The year-on-year growth of key activity indicators in April continued to be boosted by last year’s low base, but less so than in first quarter, as Ch