China’s retail sales growth accelerated in January and February, offering a positive sign for policymakers aiming to boost domestic consumption, even as joblessness rose and factory output slowed. The data highlights ongoing economic strains as the country faces renewed US tariff pressures.
Policymakers have made expanding domestic demand a top priority this year as they seek to offset the impact of tariffs imposed by the Trump administration on China’s key export sector.
China’s leaders have maintained an economic growth target of “around 5%” for 2025, but analysts caution that achieving this may be difficult given weak household demand, export pressures, and an extended property crisis.
The latest data follows weaker-than-expected export and inflation figures earlier this month, reinforcing the need for further policy support to sustain economic recovery.
“The risk to the economy is the damage from higher US tariffs on China’s exports, which will likely show up in trade data over the next few months,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
“I think Beijing will continue its current policy stance. There is no urgency to loosen monetary policy by cutting the reserve requirement ratio (RRR) or interest rates at this stage,” he added, noting that policymakers may wait several months before considering rate cuts amid trade uncertainties.
Figures from the National Bureau of Statistics (NBS) released on Monday showed retail sales—a key measure of consumption—rose 4.0% in January and February, up from December’s 3.7% increase and the fastest growth rate since November 2024. Analysts had predicted a 4.0% rise.
Household spending in the first two months was supported by holiday demand during the eight-day Lunar New Year celebrations, during which China’s box office recorded record earnings, driven by the animated hit Nezha 2.
At the annual parliamentary meeting earlier this month, Chinese leaders pledged stronger fiscal and monetary support, with a particular focus on stimulating domestic consumption.
Among the measures introduced, the government has allocated 300 billion yuan ($41.5 billion) to an expanded consumer goods trade-in scheme covering electric vehicles, appliances, and other products.
“Retail sales growth was decent, reflecting the vital role of subsidies in supporting home appliance and mobile phone sales,” said Tianchen Xu, senior economist at the Economist Intelligence Unit.
However, he warned that the impact of the scheme “may fade over time,” noting that auto sales had already declined in the first two months of the year.
According to NBS data, sales of home appliances and audio-visual devices grew 10.9%, down from December’s 39.3% surge. Meanwhile, catering revenue rose 4.3%, an improvement from December’s 2.7% increase, benefiting from the holiday boost.
On Sunday, China unveiled a “special action plan” to further stimulate domestic consumption, outlining measures such as raising household incomes and introducing a childcare subsidy scheme.
Officials from the country’s top economic ministries are set to brief the media later on Monday regarding additional steps to boost spending.
Chinese stocks remained largely flat as investors assessed the mixed economic data.
Faridah Abdulkadiri
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