What: China's retail sales show modest 4% growth in early 2025 amidst complex challenges from property market decline and renewed US tariff pressures.

Why it is important: The modest growth despite significant government intervention signals deeper structural challenges in China's retail sector, particularly as property market weakness and US tariffs threaten consumer confidence.

China's retail sector demonstrates resilience with a 4% growth in January-February 2025, surpassing December's 3.7% increase, yet faces mounting challenges on multiple fronts. The government's ambitious efforts to boost domestic consumption include a ¥300 billion trade-in scheme for electric vehicles and appliances, alongside a new childcare subsidy programme. However, these initiatives confront significant headwinds, including rising urban unemployment at 5.4% and a troubled property sector showing a 9.8% investment decline. The situation is further complicated by Donald Trump's implementation of additional 20% tariffs on Chinese goods, threatening the crucial export sector that provided stability in 2024. While some sectors show promise, with home appliance sales growing 10.9% and catering revenue increasing 4.3%, analysts remain cautious about sustained growth. The government maintains its 5% growth target for 2025, though experts question its achievability given the confluence of domestic challenges and international trade pressures.

IADS Notes: China's retail landscape is undergoing a significant transformation amid complex domestic and international challenges. As noted in January 2025, the market demonstrated resilience with projected retail sales of ¥44.2 trillion, supported by 230 million consumers embracing AI-powered retail solutions. This digital advancement coincided with the government's strategic pivot towards consumer spending, evidenced in March 2025 by a ¥300 billion stimulus package focused on domestic consumption. However, the sector faces headwinds from both internal and external pressures. November 2024 data revealed the persistent challenge of the property market decline, with home prices falling 5.9%, while December 2024 figures showed retail growth moderating to 3%, despite successful trade-in programs boosting durable goods sales. The situation is further complicated by new trade tensions, with March 2025 analysis projecting significant impact from Trump's tariffs, potentially increasing US household costs by $1,200 annually and triggering price increases across various retail sectors. This convergence of domestic transformation and international pressure suggests a critical period of adaptation for China's retail sector.

China retail sales improve as Beijing looks to consumers to ease trade pressure