China retail growth masks weakening consumer demand

China’s retail growth is currently masking underlying weaknesses in consumer demand, according to a report by S&P Global Ratings. While overall growth remains aligned with projections, transaction volumes are stagnating as rising prices offset declining sales quantities.

Consumers are increasingly pivoting toward small-ticket items that offer immediate emotional satisfaction, while demand for durable goods has weakened. This shift is attributed to diminished effectiveness of government stimulus programs and a weak property market. In the telecommunications sector, although revenue is being supported by premium products and higher component costs, handset volumes are expected to decline due to high market penetration and slower replacement cycles.

The current environment is driving intense competition among businesses as they struggle to capture market share within stagnant revenue pools and highly selective consumer spending patterns.