Jefferies Says Recovery Remains Fragile For China Despite Export Surge; Here’s The Latest Update

China’s economy is continuing to paint a mixed picture, with robust export growth masking persistent weakness in domestic demand, consumer spending, and the property sector, according to the latest Greed & Fear market strategy report by Jefferies. While the country’s manufacturing and export engine remains resilient, the report suggests that the broader economy is still struggling to generate a meaningful recovery in household consumption and private sector activity. The latest macroeconomic indicators show that Beijing’s efforts to revive domestic demand have yet to deliver the desired results. Weak retail sales, slowing credit growth, and continued stress in the real estate market indicate that consumer confidence remains subdued despite multiple policy support measures.

Consumer Spending Continues to Lose Momentum

Jefferies noted that China’s domestic economy is showing little evidence of a sustained pickup. Retail sales, a key indicator of consumer spending, declined 0.6% year-on-year in May after recording a modest 0.2% increase in April. The May reading marked the first annual decline in retail sales since December 2022, highlighting the cautious mood among Chinese households. The report also pointed to deteriorating consumer confidence. China’s consumer confidence index fell to 89.0 in April from 91.6 in February, suggesting that consumers remain reluctant to increase discretionary spending despite government initiatives aimed at boosting economic activity. Analysts believe concerns over employment, income growth, and the housing market continue to weigh on household sentiment.

Property Market and Credit Growth Remain Under Pressure

China’s real estate sector, once one of the country’s strongest economic growth engines, continues to struggle. Residential floor space sold fell 12.1% year-on-year during the January-May period, while the total value of property sales declined 14.1%, reflecting weak buyer demand and cautious investment activity. Credit expansion has also remained sluggish. According to Jefferies, Renminbi bank loan growth and private sector credit growth both slowed to 5.5% year-on-year in May, indicating that businesses and consumers are still hesitant to borrow despite relatively supportive monetary conditions. The lack of stronger credit demand suggests that economic confidence remains fragile across multiple sectors.

Export Strength Continues to Drive Growth

While domestic demand remains weak, China’s export sector continues to outperform. Goods exports surged 19.4% year-on-year in May to reach USD 377 billion, while imports rose 27.4% to USD 271 billion, reflecting strong global demand for Chinese manufactured products.

One of the standout performers has been the semiconductor industry. Exports of electronic integrated circuits jumped an impressive 111% year-on-year to a record USD 35.5 billion in May. During the first five months of 2026, semiconductor exports climbed 90% to USD 139 billion, underscoring China’s growing role in global technology supply chains despite ongoing geopolitical and trade-related challenges.

Signs of Stability Emerging in Major Cities

Despite the broader weakness in the property market, Jefferies highlighted early signs of stabilization in China’s largest urban centres. New home prices in tier-one cities increased for the fourth consecutive month in May, suggesting that housing prices may have bottomed out in major metropolitan areas.

However, the report cautioned that these improvements remain limited to the country’s biggest cities and have yet to translate into a nationwide recovery. Overall, China’s economic growth continues to rely heavily on exports and manufacturing strength, while domestic consumption, property investment, and private credit demand remain significant challenges for policymakers.

As global investors monitor China’s economic trajectory, the contrasting trends underscore the country’s uneven recovery. While exports continue to support growth, a sustained rebound in consumer spending and the property sector will likely be essential for achieving broader and more balanced economic expansion in the months ahead.

Disclaimer: This article is based on content from ANI and has been edited by the NewsX Editorial Team for clarity and readability. Readers should not make financial or investment decisions based solely on this article.

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