China Economic Comment "April data weakness driven by administrative pol..."

Research evidence excerpt

China Economic Comment "April data weakness driven by administrative pol..."

Global Research

18 May 2026ab

China Economic Comment Economics

ChinaApril data weakness driven by administrative

policy Yu Song

Economist

yu-za.song@ubs.com

+86-10-5832 8508

April data surprised significantly on the downside. Administrative policy Jennifer Zhong

tightening was likely the key driver. Administrative loosening to reverse the Economist

slowdown is expected. S1460516050002

jennifer-a.zhong@ubs.com

+86-105-832 8324

April activity data surprised significantly on the downside.

Grace Wang

This year is the start of the 5 Year plan, having a strong start is a key policy goal. S1460524050003

There were likely some front-loading activities in 1Q, especially in terms of state-led grace-zc.wang@ubs.com

investments. After the strong start of the year, policy makers became more confident +86-105-832 8335

about the economic outlook. Administrative policy stance turned effective less William Deng

supportive with greater emphasis on (1) not setting over ambitious economic goals and Economist

reaching them by making wasteful mega investment projects which tend to be debt william-w.deng@ubs.com

intensive, and (2) over report data when these overly ambitious goals could not be +852-2971 6765

achieved. At the same time, officials were told not to “sit idle” either. Therefore, the

incentive facing officials on the ground is to “do something but not too much”. But the

actual penalties imposed on officials recently have been tilted towards those who had

wrongdoings, instead of no actions. This can potentially explain why despite the PBOC’s

significant loosening of interbank liquidity, credit growth has been weak.

This mechanism is the main reason why in recent years we often have an intra-