China’s Consumer Spending Slumps as Economic Imbalance Deepens

China’s retail sales, a measure of consumption, fall for the first time in three years.

A man checks purchased goods in a cart outside a supermarket in Beijing on May 11, 2026. Wang Zhao / AFP via Getty Images

China has reported worse-than-expected consumption and investment data, highlighting a deepening economic imbalance that has fueled tensions with its major trading partners.

Retail sales, a key indicator of consumer activity, dropped by 0.6 percent in May compared with a year earlier, figures from China’s National Bureau of Statistics showed on June 16. To note, official data from Chinese Communist Party (CCP) sources often conceal unfavorable situations for the regime, and the actual data may be even worse.

The reported figures reverse April’s 0.2 percent growth and are worse than the zero percent increase that economists surveyed by Reuters had projected. It marks the first monthly decline since December 2022, when Beijing abandoned the draconian COVID-19 restrictions that forced many people to stay home.

In contrast to the sluggish consumption, officials report industrial production rose by 4.5 percent in May from a year earlier, accelerating from April’s 4.1 percent growth and exceeding the 4.3 percent growth forecast in the Reuters poll.

Fu Linghui, a spokesperson for the statistics bureau, attributed the decline in retail sales to bad weather, such as high temperatures and heavy rain in some regions, as well as last year’s high spending level driven by trade-in subsidies.

At the June 16 press conference, Fu said the imbalance between strong supply and weak demand is “acute.” He said that “some economic indicators have slowed down” since the second quarter and that “some enterprises have faced difficulties in operating,” blaming the “complex international environment” and “changes in domestic economic structure.”

But he said that, overall, the economic operation remains “stable and steady.”

Property Crisis

Separate data on June 16 show that investment in equipment, buildings, and other fixed assets outside the rural households dropped by 4.1 percent in the January-to-May period compared with the same period last year.

It marked a deeper contraction than the 1.6 percent drop reported in the first four months of the year. Economists had expected a 2 percent year-over-year drop in investment for the first five months.

In the real estate sector, investment plummeted by 16.2 percent in the January-to-May period, widening from a 13.7 percent decline in the first four months.

A high-rise building under construction in Inner Mongolia, China, on June 11, 2026. Maxim Shemetov/Reuters

Once a key engine of China’s economic growth, the housing sector has slumped for nearly five years, eroding household wealth and dampening overall consumption appetite.

Across 70 major cities surveyed by the statistics bureau, 52 recorded a month-on-month decline in May, up from 49 in April.

The statistics agency reported that new home prices in China’s first-tier cities—namely Beijing, Shanghai, Guangzhou, and Shenzhen—rose by 0.2 percent in May, while prices in smaller cities continued to decline.

“It remains too early to confidently call a bottom for the property market, as prices continue to decline, and inventory levels remain high,” Lynn Song of ING bank wrote in a note on June 16.

Property investment “will remain a major drag on growth for some time,” Song said.

Local residents who recently spoke to The Epoch Times think the economy may even be worse, pointing to a widening gap between the official data and reality on the ground. In addition to wanting to conceal negative reports, officials may also manipulate data when economic targets are tied to assessing their performance.

Imbalance

Amid the weakening domestic demands, Chinese factories have increasingly turned to overseas markets. Earlier this month, China’s customs bureau stated that exports in May surged by 19.4 percent from a year earlier, outpacing April’s 14.1 percent growth.

Zhang Zhiwei, chief economist at Pinpoint Asset Management, said exports could continue to boost China’s economic growth this year, but a widening trade surplus may spark disputes.

“The export boom can help to mitigate the weak domestic demand in the short term,” Zhang said on June 16, noting that a potential trade conflict with Europe is a risk to watch in the coming months. “But given the size of China’s economy, strong export growth will likely lead to tension with trading partners.”

Beijing’s latest economic figures came as leaders of the Group of Seven convened in Évian, France, where China’s economic imbalance is expected to be a key topic.

Aerial view of domestic vehicles waiting to be loaded onto a ship for export at Yantai port in Yantai, China, on April 10, 2026. Getty Images

European Commission President Ursula von der Leyen noted that last year, the 27-nation bloc recorded its largest-ever trade deficit with China at 360 billion euros ($417 billion).

“If you look at the year 2025, this will be remembered as the year where, for the first time ever, all Member States had a trade deficit with China,” von der Leyen said in a statement ahead of the summit.

“This is of course not sustainable.”

Reuters contributed to this report.