Key facts
- China's retail sales contracted 0.6% in May.
- This is the first decline since the country emerged from COVID-19 restrictions.
- Consumer and business confidence have weakened.
- Fixed-asset investment shrank 2.6% in the first 11 months of 2025.
- Home prices fell faster in November.
- Sales of home appliances slumped 19% in November.
China recorded its first decline in monthly retail sales since the country emerged from COVID restrictions, highlighting a stark divide between weak domestic demand and robust exports. Retail goods sales contracted 0.6% in May, according to the National Bureau of Statistics, as consumer confidence faltered.
This marks the slowest growth outside the pandemic, with analysts' median forecast for November being 2.9%. Fixed-asset investment also disappointed, shrinking 2.6% in the first 11 months of 2025, on track for its first annual drop since 1998. Home prices fell faster in November, and sales of home appliances slumped 19% from a year ago, the worst reading since early 2020. Car sales fell 8%, their biggest drop since May 2022.
Economists suggest government policies supporting consumption and the property market are inadequate. While the official 5% real growth target for 2025 is likely to be met, 2026 is expected to be more challenging if stress persists. The reliance on foreign demand to propel growth, despite trade tensions with the US, is becoming riskier as protectionism spreads.
Industrial output, however, showed a 4.8% growth from a year ago, indicating that booming exports are keeping the production side of the economy humming. This results in a lopsided economy with deepening imbalances weighing on prices as domestic demand languishes. The property sector deteriorated further, with real estate investment plunging 16% in the first 11 months. The National Bureau of Statistics cited external instabilities and uncertainties, and insufficient domestic demand as challenges in November.