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Xinyi Wu

Sherry Wang

China’s economic imbalances continued to deepen in July, as sluggish retail sales and a fixed-asset investment slump highlighted persistent weakness in domestic demand, with analysts expecting more policy stimulus from Beijing to stave off downside risks.
Retail sales, a major gauge of consumer spending, grew by 0.6 per cent year on year last month, according to data released by the National Bureau of Statistics (NBS) on Monday.
The lacklustre reading missed a 1.3 per cent rise forecast by economists surveyed by Chinese financial data provider Wind, and was down from the 1 per cent increase in June. In May, retail sales fell for the first time since China lifted Covid-19 lockdowns at the end of 2022.
Overall fixed-asset investment – covering major areas such as infrastructure, manufacturing and property construction – fell by 6.7 per cent year on year in the January-July period, performing worse than Wind’s forecast of a 6.1 per cent fall.
The drop widened from the 5.7 per cent decline recorded in the first six months of 2026.
Meanwhile, industrial output grew by 4.5 per cent in July, down from 5.3 per cent the previous month, driven by soaring export orders.
“Domestically, some regions experienced high temperatures and heavy rainfall in July. Such extreme weather has also disrupted market supply, demand and consumption,” said Fu Linghui, a spokesman for the NBS.
Nevertheless, Fu expected China to remain on track to achieve its growth target of between 4.5 and 5 per cent this year, citing resilience in the face of fluctuations in the global energy market, strong growth in sectors such as technology and artificial intelligence, and expanding macroeconomic policies.
Gross domestic product growth slowed to 4.3 per cent in the second quarter, the softest quarterly expansion since late 2022 and down from 5 per cent in the first quarter. Economic performance has become increasingly uneven, with growth supported by external trade while domestic consumption is constrained by the real estate downturn and persistent labour market weakness.


Following a meeting last month, the Communist Party’s Politburo, a major decision-making body led by President Xi Jinping, pledged to step up macro policy support and accelerate fiscal spending.
“The weak economic data indicate that the economy faces further downside risks that require more effective policy response,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management.
“The Politburo meeting in late July promised stronger fiscal spending, but the implementation and transmission likely takes time,” Zhang said. He also noted the weak figures might increase the chance of an interest rate cut by the People’s Bank of China.
Similarly, Gary Ng, a senior economist for Asia-Pacific at Natixis, said that if the downturn continued, “the pressure will mount for more government support as it can eventually hit the labour market.”
“GDP growth is no longer the top priority, but there is a bare minimum to keep the economic engine running,” he said.
Xing Zhaopeng, a senior China strategist at ANZ Research, expected monthly GDP growth to dip to 4 to 4.2 per cent in July, falling further below Beijing’s annual growth target of 4.5 to 5 per cent.
“The main reason is the absence of local fiscal spending, which was subdued by the dive of land sale revenues,” Xing said. He also noted that the central bank would likely cut the reserve requirement ratio in the third quarter to offset fiscal headwinds.
The NBS also reported that property investment, a persistent drag on economic growth, fell 19.2 per cent in the first seven months of the year, compared with a fall of 18 per cent between January and June. Sales of new homes by floor area contracted by 11.8 per cent in the first seven months, following an 11.6 per cent drop in the first half of the year.
Elsewhere, China’s surveyed urban unemployment rate stood at 5.2 per cent in July, compared with 5 per cent in June.


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Retail sales, a key consumption metric, trailed a 1.3 per cent growth forecast, while fixed-asset investment also weakened


Retail sales, a key consumption metric, trailed a 1.3 per cent growth forecast, while fixed-asset investment also weakened.


China’s domestic demand further weakens in July, analysts bet on extra stimulus

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Retail sales, a key consumption metric, trailed a 1.3 per cent growth forecast, while fixed-asset investment also weakened

Retail sales, a key consumption metric, trailed a 1.3 per cent growth forecast, while fixed-asset investment also weakened