China’s April data were weak, with softer retail sales and lower investment, while exports and housing prices gave some support. TD Securities kept its 2026 GDP forecast at 4.6% and expects the People’s Bank of China to remain cautious on further monetary easing.
Beijing is expected to lean on targeted fiscal steps rather than broad stimulus. The focus is likely to be on infrastructure spending and measures to support consumers.
Policy Fine Tuning Outlook
Policy is expected to be adjusted through fine-tuning because Q1 GDP was strong. A larger change in fiscal approach is more likely after July, once full Q2 figures are available.
Infrastructure spending may be used again to lift public fixed-asset investment. Plans would build on the CNY800bn already allocated from this year’s Budget.
Given the weak April 2026 data, we should anticipate targeted, not widespread, stimulus from Beijing. This suggests that a broad market rally fueled by cheap credit is unlikely in the near term. Derivative plays should therefore be selective, focusing on sectors poised to benefit from specific government spending.
The central bank’s cautious stance on monetary easing signals a stable outlook for the yuan. We saw a similar preference for currency stability throughout much of 2025, which limited volatility. This suggests that selling out-of-the-money call options on USD/CNH could be a viable strategy to collect premium, betting against a significant depreciation of the yuan.
Infrastructure Led Trades
The explicit mention of boosting infrastructure spending points directly towards industrial commodities. With China’s iron ore imports already holding firm above 100 million metric tons in April 2026, any new projects will likely sustain this demand. Traders should consider long positions in copper and iron ore futures to capitalize on this expected fiscal push.
For equities, this policy approach favors specific sectors over broad indexes like the FTSE China A50. The soft retail sales data, which grew just 2.3% last month, suggests avoiding consumer discretionary names for now. Instead, we can look at call options on construction and heavy machinery ETFs that will be direct beneficiaries of the CNY800bn in new infrastructure funds.
The official timeline indicates no major policy shifts are likely until after the full second-quarter numbers are released in July. This points to a period of range-bound trading and uncertainty for the next several weeks. This environment is suitable for strategies that profit from low volatility, such as selling strangles on major Chinese stock indices.
