China's May Exports Strong but Consumption Weak, U.S. Media: Economic Imbalance Becomes Blindingly Clear

China's National Bureau of Statistics released economic data on June 16 showing that retail sales in May declined year-on-year for the first time since the end of the pandemic, marking the first drop since December 2022 when China ended its strict 'zero-COVID' policy. Fixed-asset investment from January to May fell 4.1% year-on-year, the largest drop in six years, worsening from a 1.6% decline in the first four months.

In contrast, industrial output in May rose 4.5% year-on-year, up 0.4 percentage points from April, driven largely by strong exports. According to data released by China's General Administration of Customs on June 9, exports in dollar terms surged 19.4% year-on-year in May, far exceeding expectations.

The Wall Street Journal reported that this divergence—strong exports against weakening domestic consumption and investment—reveals a deepening imbalance in China's economy. While exports have become the primary engine of growth in 2024, they have contributed to global trade imbalances and rising geopolitical tensions, including looming trade disputes between China and Europe.

The report noted that domestic demand remains weak amid a sluggish property market. Producer Price Index (PPI) rose 3.9% year-on-year in May due to soaring commodity costs from the Middle East conflict, while Consumer Price Index (CPI) rose only 1.2%, indicating businesses are unable to pass on rising costs to consumers.

Oxford Economics senior economist Sheana Yue stated that May's data further confirms the widening gap between strong external demand and weak domestic activity. The sharp contrast between robust exports, low inflation, and soft economic indicators is becoming increasingly apparent.

The article suggests that Beijing is unlikely to rush new stimulus measures, as China remains on track to achieve its official GDP growth target of 4.5% to 5% for the year, despite weak household spending. Analysts believe a 2025 government subsidy program for appliances, EVs, and other goods may have pulled forward consumer demand that would have otherwise occurred this year.