1 China’s April data reflects continued deflation despite Beijing’s claim of ‘stable growth’
April PBoC data
May 14
The People’s Bank of China released China’s credit and social financing data for April 2025.
- Broad money supply (M2) increased 8 percent year-on-year to 325.17 trillion yuan, but decreased 0.89 trillion yuan from the previous month.
- Narrow money supply (M1) increased 1.5 percent year-on-year to 109.14 trillion yuan, but decreased 4.35 trillion yuan from the previous month.
- New renminbi loans totaled 280 billion yuan, a multi-quarter low and a rare occurrence for the month of April. This is compared to 730 billion yuan in April 2024 and 3.64 trillion yuan in March 2025.
- Household loans decreased by 19.5 billion yuan. Of the total, short-term loans decreased by 31.8 billion yuan while medium- and long-term loans increased by 12.4 billion yuan.
- Corporate (non-governmental institutions) loans increased by 610 billion yuan. Of the total, short-term loans decreased by 480 billion yuan, medium- and long-term loans increased by 250 billion yuan, and bill financing increased by 834.1 billion yuan.
- Renminbi deposits decreased by 440 billion. This is compared to a decrease of 3.92 trillion yuan in April 2024 and an increase of 4.25 trillion yuan in March 2025.
- Household deposits decreased by 1.39 trillion yuan.
- Non-financial corporate deposits decreased by 1.33 trillion yuan.
- Fiscal deposits (government) increased by 371 billion yuan.
April NBS data
May 19
The National Bureau of Statistics released some economic data for April 2025.
- Total retail sales of consumer goods increased by 5.1 percent year-on-year to 3.7174 trillion yuan.
- National fixed asset investment (excluding rural households) from January to April 2025 increased by 4.0 percent year-on-year to 14.7024 trillion yuan.
- Real estate development investment from January to April 2025 declined by 10.3 percent year-on-year to 2.773 trillion yuan.
- During the January to April 2025 period, the sales area of new commercial housing decreased by 2.8 percent year-on-year to 282.62 million square meters, while the sales revenue of new commercial housing decreased by 3.2 percent year-on-year to 2.7035 trillion yuan.
The NBS said that the national economy maintained stable growth in April in the face of “rising external shocks and mounting internal challenges” thanks to the strong leadership of Party Central with Comrade Xi Jinping at the core.
Backdrop
1. President Donald Trump announced “Liberation Day” tariffs on April 2 and gradually raised tariffs on Chinese imports to 145 percent after Beijing announced tariff and non-tariff countermeasures.
2. On May 6, the PBoC cut the seven-day reverse repurchase rate to 1.4 percent from 1.5 percent and trimmed the reserve ratio requirement by half a percentage point. The RRR cut would release about 1 trillion yuan in long-term liquidity, according to PBoC governor Pan Gongsheng.
Our take
Beijing has spun the narrative that China’s April 2025 economic data shows the continuation of the Chinese economy’s so-called “stable growth with positive momentum” (穩中向好) and “strong resilience” (韌性強), and that the economy withstood the pressures of the U.S.-China tariff war.
However, a deeper look at China’s financial and consumption metrics reveals a starkly different picture, marked by persistent deflation, weak credit demand, and an economy heavily reliant on government debt to mask underlying vulnerabilities.
1. April’s monetary indicators exposed significant strains. While M2 money supply growth rose to 8 percent from a year ago, fueled by early-2025 policy easing and local debt swaps, M1 growth stagnated at 1.5 percent. The widening M1-M2 gap indicates poor liquidity, with funds failing to translate into real economic activity. Meanwhile, plummeting RMB loans and deposits reflect subdued credit demand and contracting financing activity, underscoring China’s anemic domestic demand.
Household lending in April remained tepid, with medium- and long-term loans growing by just 12.4 billion yuan. This signals that policies to boost mortgage and auto consumption have failed to gain traction. Corporate lending showed signs of “idling,” with short-term loans sharply declining and bill financing surging by 834.1 billion yuan in a single month. This suggests firms are prioritizing short-term liquidity over productive investments in expansion or innovation, with capital circulating within the banking system rather than driving industrial growth.
Declines in household and corporate deposits in April, driven by reduced incomes and strained corporate cash flows, further highlight economic malaise. While fiscal deposits surged due to expanded government borrowing, these funds remain largely idle, offering minimal stimulus to the real economy.
Finally, social financing growth was nearly flat month-on-month in April. Although social financing rose 553 billion yuan from the previous year, this was almost entirely propped up by 0.98 trillion yuan in government bond issuance — accounting for 84.4 percent of financing increment in April 2025 (compared to 0.37 trillion yuan in April 2024). This heavy reliance on public debt masks stagnant private investment and weak corporate borrowing appetite, underscoring the fragility beneath the surface of Beijing’s reported economic stability.
2. The 5.1 percent year-on-year increase in retail sales of consumer goods for April 2025 reported by the NBS appears to signal continued economic resilience. But a closer look at the figures reveals inconsistencies.
First, retail sales growth in high-consumption first-tier cities like Beijing, Shanghai, and Shenzhen has consistently trailed the national average, undermining claims of robust consumer demand. Moreover, the China Catering Industry Development Report 2025, cited by Xinhuanet on April 15, reported a 6.6 percent drop in per capita catering consumption to 39.8 yuan in 2024, starkly contrasting with the NBS’s claim of a 5.3 percent rise in 2024 catering revenue to 557.18 billion yuan. These discrepancies raise questions about the reliability of official data.
Rising domestic skepticism, the U.S.’s imposition of steep tariffs on Chinese exports in early April 2025 disrupted the export sector, likely dampening economic sentiment and consumer spending. With the first quarter buoyed by increased consumption during the Chinese New Year holiday period, it is improbable that April’s consumption surpassed earlier months. The reported retail sales growth appears inflated, masking a broader contraction in consumer activity amid intensifying external pressures.
3. Another sign of growing economic problems in China is the PBoC’s forced balance sheet contraction instead of liquidity injections in the first four months of 2025. Central bank data reveals a 4 percent decline in reserve money from 38.87 trillion yuan in January to 37.38 trillion in April, the equivalent of a 1.5 trillion yuan reduction. This contraction stems from maturing government bonds, necessitating fund repayments, and proactive loan repayments by banks to the central bank.
These pressures likely prompted the PBoC’s comprehensive RRR cut on May 15 that unlocked approximately 1 trillion yuan in long-term liquidity. Officially framed as a move to bolster the economy against U.S. tariff impacts, the cut is more accurately a reactive response to liquidity stagnation and impaired credit transmission. Despite ample liquidity, banks face a shortage of creditworthy borrowers and are continuing to channel funds into government bonds, central bank bills, or interbank lending — effectively “idling” capital within the financial system rather than stimulating real economic activity.
4. April’s financial and economic indicators paint a grim picture of persistent deflation, contracting demand, and eroding confidence. Beijing’s efforts to project “stable growth” through curated data increasingly fail to convince global markets, domestic firms, and consumers. With the 90-day tariff truce unlikely to yield a viable, longer-term U.S.-China agreement, and with the prospect of escalated U.S. tariffs looming, China’s economic prospects for the second half of 2025 appear increasingly precarious.
2 Why ‘iron capped princes’ were brought up in probe of Guangxi gov’t head
Guangxi gov’t head probed
May 16
The Central Commission for Discipline Inspection announced that Lan Tianli, deputy Party secretary of Guangxi Province and chairman of the Guangxi government, was under investigation for serious violations of discipline and the law. State mouthpiece Xinhua reported that Lan was still conducting local inspections from May 10 to May 11, and attended a discussion meeting in the evening of May 11.
On the same day, the Guangxi Party Committee Standing Committee held an expanded meeting to announce the investigation of Lan Tianli. The meeting said that the Guangxi Party Committee firmly supports the decision of Party Central regarding Lan and that the probe reflects the “resolute determination and strong will” of Party Central with Comrade Xi Jinping at the core to “consistently and thoroughly advance the comprehensive and strict governance of the Party.”
The meeting added that the investigation of Lan serves as another serious warning to officials that there are no “red books and iron coupons” (丹書鐵券, i.e. no “get-out-of-jail-free” card) and no “iron-cap princes” (鐵帽子王, or someone who is above the law). Regardless of who a person is, or how unique their position or identity may be, anyone who violates Party discipline or state law will be severely punished, the meeting noted.
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Rumors circulating in overseas Chinese-speaking circles claim that Lan Tianli’s wife, younger brother, son, and secretary have also been detained.
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Between May 9 and May 14, or the period leading up to Lan Tianli’s investigation, four bureau level officials in Guangxi were also probed:
- Zhong Hengqin, Standing Committee member of the Qinzhou Municipal Party Committee and Qinzhou vice mayor
- Li Wenbo, deputy secretary of the Guangxi Party Committee’s Political and Legal Affairs Commission
- Wei Yan, Standing Committee member and secretary-general of the Wuzhou Municipal Party Committee
- Pan Liaoting, Party Committee member and deputy general manager of Guangxi Beibu Gulf International Port Group
The last provincial-level official investigated before Lan Tianli was Jin Xiangjun, the governor of Shanxi Province, on April 12. Jin had previously worked in the Guangxi government from September 1998 to January 2018.
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Lan Tianli spent the bulk of his career in the Guangxi government:
- Lan previously served as director of the Guangxi Department of Science and Technology, mayor and Party secretary of Hechi City, and other roles.
- November 2011: Lan was promoted to vice chairman of the Guangxi Autonomous Region Government and tasked with concurrently overseeing regional border trade initiatives (including the Beibu Gulf Economic Zone, Pingxiang Comprehensive Bonded Zone, and China–Malaysia Qinzhou Industrial Park).
- January 2018: Lan was appointed chairman of the Guangxi People’s Political Consultative Conference, a promotion.
- October 2020: Lan, who was then at the provincial rank, returned to serve as vice chairman and acting chairman of the Guangxi government.
- January 2021: Lan was appointed chairman of the Guangxi government.
CCP curbs smuggling of rare earths and strategic materials
May 9
The Office of the National Export Control Coordination Mechanism convened a special meeting with various departments to launch a crackdown on the smuggling of strategic mineral exports.
The meeting noted that strengthening export controls over strategic mineral resources is vital to national security and development interests. The meeting added that since the PRC imposed export controls on gallium, germanium, antimony, tungsten, and medium-to-heavy rare earths, some foreign entities have colluded with domestic criminals and have been constantly devising new smuggling methods in an attempt to evade enforcement.
May 12
The Office of the National Export Control Coordination Mechanism organized a strategic minerals full-chain export control deployment meeting in Hunan’s Changsha City. The meeting was attended by representatives of various departments, as well as local authorities from key strategic mineral resource provinces and regions such as Inner Mongolia, Jiangxi, Hunan, Guangdong, Guangxi, Guizhou, and Yunnan.
The departments include:
- Ministry of Commerce
- Ministry of Industry and Information Technology
- Ministry of Public Security
- Ministry of State Security
- Ministry of Natural Resources
- Ministry of Transport
- State-owned Assets Supervision and Administration Commission
- General Administration of Customs
- State Administration for Market Regulation
- State Post Bureau
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Brief background of Beijing’s recent efforts at strategic minerals control
- December 2021: The PRC consolidated several rare earth companies to form the China Rare Earth Group, which is directly overseen by SASAC. The group controls 68 percent of heavy rare earth mining quotas.
- July 3, 2023: The PRC began export controls on gallium and germanium-related items.
- Aug. 15, 2024: The PRC extended export controls to antimony-related items.
- Dec. 1, 2024: The PRC released a dual-use items export control list, covering many rare metals and alloys containing rare metals.
- Dec. 3, 2024: The PRC announced that it would not approve export licenses for gallium, germanium, antimony, and ultra-hard material-related dual-use items to the United States, and banned exports of such items to U.S. military users or for military purposes.
- Feb. 4, 2025: The PRC added tungsten, tellurium, bismuth, molybdenum, and indium-related items to the export control list.
- April 4, 2025: The PRC imposed further controls on rare earth elements such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. According to mainland media, since the PRC implemented export controls on medium and heavy rare earths prices of dysprosium, terbium, yttrium, and gadolinium in Europe have surged.
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China is the world’s largest producer and consumer of rare earth products. It possesses the most complete rare earth industry chain globally and holds a strategic advantage in the rare earth sector. About 86 percent of global rare earth ore processing (refining and separation) relies on Chinese capacity.
Among China’s regions, Guangxi stands out as the province with the best-preserved rare earth resources and the latest to be developed, making it a region of strategic importance.
Our take
The investigation of Lan Tianli, as well as other Guangxi and former Guangxi officials, could be part of an effort by the Xi Jinping leadership to more tightly control “strategic materials” and safeguard the regime’s economic resources amid escalating trade tensions with the United States and heightening geopolitical pressures.
The probe could also be part of Xi’s broader campaign to rein in the remnant elements of a once all-powerful elite CCP faction that opposes him.
1. Guangxi, a southern Chinese province bordering Vietnam, has long grappled with systemic corruption and various forms of smuggling. In a more recent example, a 2022 ruling from the Guangxi High Court exposed a smuggling ring that misdeclared 8,183.445 tons of high-value minerals like antimony ingots as low-value goods, with a case value of 170 million yuan — equivalent to 20.5 percent of China’s 2022 antimony ingot exports.
Rare earth smuggling appears to be undermining the PRC’s strategic material export controls and driving down prices amid the restriction of supply. Data from Hua Jing Industry Research Institution shows that China’s rare earth exports rose 5.1 percent year-on-year to 14,178 tons in the first quarter of 2025, but the export value fell 10.9 percent to $127.71 million. Meanwhile, the average export price of rare earths in Q1 2025 dropped 15.1 percent to $9,000 per ton (down from $10,600 in Q1 2024), with March 2025 prices plummeting 23.6 percent to $8,100 per ton.
Guangxi officials like Lan Tianli are likely to have had a hand in smuggling operations or facilitating smuggling. During the Jiang Zemin-Hu Jintao era, Lan oversaw Guangxi’s regional border trade initiatives as vice chairman of the Guangxi government. The four bureau-level Guangxi officials who were probed in the lead up to Lan’s investigation, as well as Shanxi governor Jin Xiangjun, all likely played a role in the smuggling and corruption troubles in Guangxi.
As Beijing comes to grips with the Sino-U.S. trade war and other issues pertaining to rare earths and other strategic materials, it would naturally turn to the anti-corruption campaign to “rectify” the Guangxi officialdom and hopefully get a better handle on the smuggling problem.
2. The senior ranks of Guangxi’s local government have curiously been “spared” during Xi’s over decade-long anti-corruption campaign, with only six sub-provincial officials investigated before the 20th Party Congress in 2022. A possible reason for this unusual development could be that Guangxi Province was a stronghold of the Jiang Zemin faction. The probe of the provincial-level official Lan Tianli therefore marks a significant escalation in anti-corruption efforts in Guangxi and could potentially be tied to factional struggle in the CCP elite.
Large-scale rare earth smuggling is typically controlled by state-owned enterprises backed by elite factions and Party princelings. Guo Shengkun, a Jiang faction lieutenant and former Politburo member who was Guangxi Party secretary from 2004 to 2012, previously headed major SOEs in the nonferrous metals sector. Meanwhile, lower level officials like Lan Tianli would have been (unofficially) tasked with ensuring the success of smuggling operations through their various portfolios. Lan’s somewhat circuitous rise to the top ranks of the Guangxi local government suggests that he likely aided the Jiang faction’s interests, and was duly rewarded and protected.
The most notable sign that Lan’s investigation is connected with factional struggle is the warning to officials made at the May 16 expanded meeting of the Guangxi Party Committee Standing Committee. The meeting made a rare reference to “red book and iron coupons” and “iron-cap princes,” or phrases that the Xi leadership previously used when targeting Zeng Qinghong, Jiang Zemin’s former political enabler and current de facto leader of the remnant Jiang faction. That the Guangxi Party Committee Standing Committee would choose those phrases suggests direct input from the Xi leadership; the Politburo would have to sign off on the investigation of a provincial level official. The factional struggle connection is further affirmed with the meeting indirectly urging Guangxi officials to distance themselves from Lan (and by extension, his political backers and associates), as well as reaffirm their loyalty to Beijing and rally around the “Xi core.”
