#4 - Weak Retail Data, Tech Clampdown, and a Surprise Rate Cut

Edited in collaboration with my custom GPT to refine syntax, clarity, and structure for improved readability. I do not express my personal beliefs in this newsletter; instead, I aim only to present and format information sourced from credible external references. That said, this is not intended to showcase my writing skills, but rather to help me stay informed in this industry—and, hopefully, help you do the same.

China’s Recovery: Weak Retail Data, Tech Clampdown, and a Surprise Rate Cut

June 16, 2025 — Shanghai

One week after renewed trade negotiations in London, China’s economy continues to wrestle with instability. Sluggish consumer data, growing tech sector scrutiny, and a surprise rate cut by the People’s Bank of China (PBOC) reveal an uncertain policy path as Beijing juggles growth targets and global competition.

1. Retail Sales Miss Expectations

Retail sales rose just 2.3% year-over-year in May, falling short of the expected 3.5%, according to the National Bureau of Statistics. Spending on household goods, apparel, and dining all declined from April, signaling persistent consumer caution despite stimulus efforts.

2. PBOC Surprises with Mid-June Rate Cut

On June 14, the PBOC unexpectedly trimmed the one-year medium-term lending facility (MLF) rate by 10 basis points to 2.40%, aiming to inject liquidity into a slowing credit environment. The move signals concern over falling domestic investment and stubborn disinflation.

3. Tech Sector Faces New Regulatory Wave

China’s Cyberspace Administration launched a new round of compliance checks targeting AI, online education, and cloud service firms. While officials cite “data sovereignty” as the rationale, analysts view the move as part of broader efforts to tighten control over strategically sensitive sectors amid U.S. tech rivalry.

4. Youth Unemployment Nears 18%

China’s youth jobless rate climbed to 17.8% in May—just shy of the record highs seen in 2023. Economists warn that service-sector weakness and private-sector retrenchment are limiting job creation for new graduates, adding pressure to fiscal authorities ahead of the summer labor wave.

5. Real Estate Risks Reemerge

New data show residential property prices fell 0.6% month-over-month in Tier 2 cities, despite support measures announced earlier this year. Default risks remain elevated among smaller developers, raising fresh concerns about contagion in China’s broader financial system.

6. Strategic Outlook

While last week’s trade talks sparked cautious optimism, domestic headwinds have intensified. The PBOC’s rate cut and new tech oversight underscore the government’s reactive posture. Without a rebound in consumer demand or clarity on long-term industrial policy, China’s recovery risks becoming increasingly unbalanced—and global investors are taking notice.