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AI Technology · China Economy · Consumer Spending · Exports
China's economy exhibits a widening divergence as retail sales declined 0.6% and fixed-asset investment shrank 4.1% in May, while industrial production climbed 4.5% driven by an AI-fueled export boom.
Domestic consumer spending and investment slumped to levels unseen since the pandemic, with home prices falling faster and private capital expenditure down 7.1% in the first five months, the worst pace since 2020. Manufacturing investment also declined for the first time in six years.
In stark contrast, high-tech manufacturing soared 15% in value added, and electronics output jumped 17%, with overseas sales of semiconductors soaring 111%, according to data released by the National Bureau of Statistics. This imbalance, noted by Lynn Song of ING Bank NV and Bloomberg Economics, places pressure on policymakers for monetary and fiscal easing, including potential interest rate and reserve requirement ratio cuts and increased fiscal spending in the second half, as stated by Allen Ding of China Citic Bank International Ltd.
The yuan weakened and the Hang Seng China Enterprises Index fell 1.3% following the data release, reflecting investor disappointment and concerns about the broader economy's health.
