China: Industrial strength outpaces weak consumption – Commerzbank

Commerzbank’s Senior Economist Dr. Henry Hao expects upcoming China data to confirm a structural divergence: Industrial Production around 5.5% year-on-year, supported by a 21.8% export surge in green tech, versus modest 3.0% retail sales and subdued Fixed-Asset Investment near 1.5%. He sees infrastructure-led support only materialising from Q2 as record bond issuance is deployed.

Exports drive growth as demand lags

"The upcoming release is likely to confirm that China’s industrial sector remains the primary driver of the economy. We forecast Industrial Production (IP) to grow by 5.5% yoy."

"The disconnect between supply and demand is expected to persist, with retail sales forecast at a modest 3.0% yoy. While the January-February period could benefit from strong service consumption, driven by robust domestic tourism during the Lunar New Year holiday, this momentum could be largely offset by weakening demand for big-ticket items."

"Fixed-asset investment (FAI) is expected to edge into positive territory at 1.5% yoy, marking a shift after the contraction environment in 2025 H2. However, we maintain a cautious outlook, as FAI is likely to remain subdued in the near term."

"Consequently, the immediate stabilization of FAI hinges on equipment upgrades, while the broader infrastructure surge remains a prospect for the second half of the year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)