China's domestic economy remains weak despite export boom, says Jefferies report

New Delhi [India], June 20 (ANI): China's domestic economy continues to show signs of weakness despite a strong export performance, with consumer spending, property activity and credit growth remaining under pressure, according to a recent Greed & Fear market strategy report by Jefferies.
The report noted that recent macroeconomic data from China shows "a continuing lack of any evidence of a pickup in domestic demand", highlighting persistent challenges in the world's second-largest economy.
Jefferies pointed out that China's retail sales declined by 0.6 per cent year-on-year in May, compared with a 0.2 per cent increase in April, marking the first annual decline since December 2022.
"On the face of it, the latest China macro data shows a continuing lack of any evidence of a pickup in domestic demand. Retail sales declined by 0.6% YoY in May compared with a 0.2% YoY increase in April. This is the first YoY decline since December 2022," the report said.
The weakness in consumption is also reflected in consumer sentiment. According to the report, China's consumer confidence index fell to 89.0 in April from 91.6 in February, indicating that households remain cautious despite various policy support measures.
The property sector, a key driver of China's economy, also remains under stress. Jefferies said residential floor space sold declined by 12.1 per cent year-on-year in January-May, while sales value fell 14.1 per cent during the same period.
Credit growth has also slowed. "There also remains a lack of evidence of any pickup in credit growth. Renminbi bank loan growth and private sector credit growth both slowed to 5.5% YoY in May," the report noted.
At the same time, China's export engine continues to perform strongly. The report said exports of goods rose 19.4 per cent year-on-year in US dollar terms to USD 377 billion in May, while imports increased 27.4 per cent to USD 271 billion.
A notable bright spot has been the country's semiconductor-related exports. "China's exports of electronic integrated circuit continue to surge reflecting the booming price of chips, rising by 111% YoY to a record US$35.5bn in May," Jefferies said. The report added that such exports are up 90 per cent year-on-year to USD 139 billion in the first five months of 2026.
While domestic demand remains weak, the report noted some improvement in China's largest cities. "Home prices continue to look like they have bottomed out in China's biggest cities," it said, adding that new home prices in tier-one cities rose for the fourth consecutive month in May.
Still, Jefferies said the broader picture remains one of an economy relying heavily on exports and manufacturing strength while domestic consumption, property investment and credit demand continue to lag. (ANI)