China’s Industrial Growth Beats Expectations, but Domestic Demand Still Lags

China’s industrial output came in stronger than expected in April, signaling that the manufacturing and high-tech sectors continue to provide solid support for the broader economy. Official data released by the National Bureau of Statistics on May 19 showed that industrial production from large enterprises rose 6.1% year-over-year—higher than the 5.5% market consensus. Although the pace eased from March’s 7.7%, it remains robust, suggesting that industrial activity is still on a steady recovery track.

Breaking it down by sector, manufacturing grew by 6.6%, with equipment and high-tech manufacturing jumping 9.8% and 10%, respectively. These gains reflect continued progress in industrial upgrading and transformation. Notably, output of advanced, high-value products such as 3D printing equipment, industrial robots, and new energy vehicles surged by 60.7%, 51.5%, and 38.9%, respectively—clear indicators that green and smart manufacturing are becoming key drivers of growth.

For the first four months of the year, industrial output expanded 6.4%, underlining the sector’s overall momentum. Still, authorities noted that some companies are under pressure from rising operating costs and uneven demand recovery, underscoring the need for continued policy support.

That said, other economic indicators point to lingering weakness in domestic demand. Retail sales in April grew by 5.1% compared to a year ago—missing expectations—as the rebound in consumer spending remains patchy. Export growth also slowed to 8.1% from March’s 12.4%, with shipments to the U.S. hit particularly hard due to additional tariffs.

In financial markets, the benchmark 10-year government bond yield hovered around 1.68%, signaling investor caution about the economic outlook. The yuan traded at roughly 0.1381 per U.S. dollar, showing little volatility. A private survey by Caixin showed the manufacturing PMI dipped slightly to 50.4 in April. While still in expansion territory, it suggests business activity may be losing some momentum.

In short, China’s industrial sector remains a bright spot, powered by high-tech upgrades and clean manufacturing. But the mixed signals from consumption and exports are a reminder that broader recovery requires more than just strong factory output. Continued policy focus on boosting domestic demand, restoring confidence, and advancing innovation will be essential to sustaining growth in the months ahead.