Discussions in Geneva are helping improve trade ties between China and the US. In May, China saw a rise in retail sales, fueled by online sales promotions and trade programs. The global environment is still uncertain, creating challenges for China’s economic recovery. The government is ready to adjust economic policies as needed.

Challenges in the Labour Market

Even though prices are low overall, this is affecting businesses, jobs, and incomes. Some sectors are struggling to find workers, and certain groups are facing job pressures. The tricky external environment is impacting China’s labour market. Uncertain trade policies have made it tough for China to keep steady economic growth since the second quarter. In May 2025, China’s industrial output grew by 5.8% compared to last year, which is slightly below the expected 5.9% and down from 6.1% previously. However, retail sales in May saw the fastest growth since December 2023. This summary shows a mixed but revealing view of China’s current economy. On one side, new data indicates stronger retail sales, likely boosted by online discount campaigns, showing there’s still consumer interest. But, the increase in retail sales isn’t seen equally in other key areas. Industrial production rose by 5.8% year-on-year, falling short of predictions and signaling a slight slowdown. Although this difference seems small, it suggests the economy is not moving forward uniformly across sectors. Divergence between manufacturing and services can lead to volatility in capital flows.

External and Internal Pressures

Consumer demand seems stable, but low prices and weak inflation hint at underlying issues: producers are struggling. If companies are lowering prices just to sell their goods or meet weak demand, this can hurt wages, hiring, and long-term profits. Recruitment challenges in key sectors reflect a broader slowdown in job growth. We cannot overlook the external uncertainties—much of this stems from unclear global trade guidelines and geopolitical tensions. Changes in demand from other countries and shifts in global sourcing have complicated growth planning. This mix of persistent and temporary challenges has required ongoing action from policymakers. Officials have already shown they are ready to adjust fiscal support and monetary policies. This proactive approach is common in times of uneven growth. However, just because these tools are available doesn’t mean they will work effectively—especially when confidence is fragile and financial markets react more to news than fundamentals. Looking ahead, we should prepare for more fluctuations in manufacturing output, shipping, and domestic demand metrics. Any plans depending heavily on industrial growth to boost the short-term economy need to consider new disruptions—especially in sectors sensitive to commodity prices or slim profit margins. By keeping an eye on monetary policies and public spending shifts, we can identify where the next round of support might emerge. Typically, there’s a delay between policy changes and their effects on the economy—this lag creates vulnerable moments when volatility can increase. Limited liquidity—often seen in Asian markets during summer—can make things worse. When momentum seems broad but data tells a different story, it may be safer to limit short-term risks. Focusing on steady but selective demand—especially where consumer reliance is on imports rather than local sources—may offer more reliable guidance. While opportunities will not vanish, they might be less noticeable due to differences in data timing and policy responses. In the end, retail figures may capture attention, but issues in employment and capital formation will have a greater impact on medium-term stability. Investors should pay closer attention to labour market indicators than to broad headline indices. As Li’s team continues to enhance stimulus efforts, it’s not just the scale of policy that matters, but also how quickly it’s implemented that will shape reactions. Short-term optimism should not overshadow the areas of deceleration that have already emerged. Economic indicators can be like streams under ice: calm on the surface, but deeper movements can reveal the true direction. Create your live VT Markets account and start trading now.

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