• Consumption Trends – Recovery growth in retail sales remains weak. Tourism data from the May holiday suggest that consumer concerns regarding COVID are diminishing but sluggish income growth is dragging consumer confidence.   

• Trade Trends – China’s export growth accelerated unexpectedly in April. Pandemic surges in emerging markets as well as the pace of economic re-opening in advanced economies cloud the outlook for exports looking forward. Some moderation in Chinese export growth is probable in the 2H.

Implications for Business

China's economic growth at present is essentially driven by export growth and real estate investment, period. Both drivers are likely to be resilient over the short term, basically ensuring that China’s Q2 GDP growth will be strong. However, both growth drivers are arguably unsustainable. Slumping consumption growth and weak manufacturing investment raise concerns about the longer-term picture. Slowing household income growth presents a serious constraint. Members should carefully parse the hyperbole of China’s standout recovery as reported in the global business media against the realities of China’s imbalanced and unsustainable composition of growth at the present time.