China’s latest data show strong external trade but weak domestic demand across consumption, investment, production and credit in April. Higher energy prices and supply chain disruption added pressure to growth conditions.
Exports rose from 2.5% year-on-year in March to 14.1% in April, driven mainly by non-US partners. Imports increased to 25.3% year-on-year as manufacturers bought more intermediate goods to meet export orders.
Trade Strength Domestic Weakness
Industrial production was described as soft, while Fixed Asset Investment weakened, led by property. FAI shifted from 1.7% year-to-date year-on-year growth in 1Q to a 1.6% contraction in April.
Private investment fell 5.2% year-on-year, pointing to subdued business activity. Inflation trends diverged, with producer prices picking up while consumer prices lagged.
DBS expects no 1-year Loan Prime Rate cuts over the next 18 months. Policy support is expected to lean more on fiscal measures, as higher energy prices reduce the scope for near-term easing.
The piece was produced using an AI tool and reviewed by an editor. It was published under FXStreet Insights Team.
Market Implications And Trade Ideas
The Chinese economy is showing a major split between strong foreign demand and very weak conditions at home. This divergence creates clear signals for traders in the coming weeks. We should focus on strategies that benefit from a stable yuan but a struggling domestic market.
This pattern is confirmed by last month’s data, which showed exports grew a surprising 9.8% while retail sales disappointed at only 2.5% growth. The People’s Bank of China also just held its key one-year Loan Prime Rate (LPR) steady for the ninth consecutive month, signaling that monetary policy will not be loosened. This reinforces the idea that support will come from government spending, not cheap money.
When we look back at the economic data from April of 2025, we can see this trend was already forming. At that time, exports had surged 14.1% while domestic private investment actually fell 5.2%. This historical data shows the internal weakness is not a new problem, giving us confidence that this divergence will persist for now.
For foreign exchange traders, this suggests the yuan may hold its strength against the dollar due to the strong trade surplus. We should consider using call options on the CNH to capitalize on potential upside without taking on excessive risk. The lack of expected interest rate cuts provides a solid floor for the currency.
In the equity markets, the weak domestic picture points to downside risk for broad Chinese indices. We should consider buying put options on the CSI 300 index, as struggling consumer and property sectors will continue to weigh on performance. The ongoing property debt crisis, which has shown little improvement since 2025, remains a significant drag on investor sentiment.
This ongoing slump in fixed asset investment, a trend we saw when it contracted 1.6% back in April 2025, points to weak demand for industrial metals. Therefore, we should look at shorting copper or iron ore futures. These commodities are highly sensitive to Chinese construction and industrial activity, which remains subdued.
Finally, since the government is not expected to cut its key lending rate over the next year, bets on falling interest rates are unlikely to pay off. This makes interest rate swaps, where one pays a fixed rate, a potentially stable position. This view is supported by rising producer price inflation, which limits the central bank’s ability to ease policy.
