Weak consumption: China has repeatedly pledged to rebalance its economy toward consumer spending but has not followed through. Retail sales growth bottomed out in December 2025 (0.9 percent year-on-year), then rose slightly to 2.8 percent in early 2026 before slowing again in March to 1.7 percent.1 A 9.1 percent drop in auto sales for Q1 dragged down retail spending for the quarter.2
In an effort to stabilize prices, Beijing had subsidized trade-ins of cheaper models in favor of higher-end models.3 Beijing’s “anti-involution” action led to an excess supply of lower-priced cars, fueling exports—China’s passenger car exports rose 60.6 percent year-on-year in Q1. declining 2.2 percent in all of 2025.7 The sharp increase was driven partly by NBS adding power investment into the figure, which had previously been tracked separately by the National Energy Administration.8
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