China retail sales slide as lockdowns hit world’s biggest consumer market

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China’s retail sales declined for a third consecutive month in May as lockdowns and mass testing campaigns under President Xi Jinping’s zero-Covid strategy curtailed growth in the world’s biggest consumer market.

Retail sales, an important gauge of consumption, fell 6.7 per cent compared with the same month a year ago. While the pace of decline eased from April, the bleak data marked the latest indicator of how China has struggled to kick-start consumer spending because of the ever-present threat of lockdowns.

Sheana Yue, China economist with Capital Economics, warned of a “risk of relapse” amid greater restrictions and slowing external demand.

“Even if further lengthy citywide lockdowns like that in Shanghai are avoided, the zero-Covid strategy means that targeted lockdowns will remain commonplace, depressing consumer activity and spending,” she said. “The recovery in consumer activity still has a longer way to go than that in industry.”

China’s industrial production, which measures output from the country’s mines, factories and utilities sector, recovered slightly in May, gaining 0.7 per cent compared with the same period a year ago.

Factory output was buoyed by robust growth in the production of new energy vehicles and solar cells.

According to data from China’s National Bureau of Statistics, car and online goods sales, as well as sales of food and beverages by larger companies, improved but the gauge was dragged down by steep declines in spending on catering and clothing.

Over recent days, large swaths of Shanghai, China’s most populous city, as well as parts of the capital Beijing have been forced to undergo mass testing.

The orders, which were issued just days after Shanghai emerged from a months-long lockdown, were a reminder that Xi’s antivirus strategy of mass testing, rapid lockdowns and strict quarantine remains a greater priority than economic growth.

Despite having seven-day average daily case numbers of about 200, down from a peak of about 30,000 in April, most large Chinese cities have instituted regular Covid tests regardless of symptoms.

As of Monday, about 68mn people were under at least district-based control measures, with six cities implementing full or partial lockdowns, according to a Nomura analysis. The pandemic situation has worsened “at the national level” for the first time since mid-April, the bank’s analysts said.

The Nomura analysts also pointed out that during a visit to China’s southern Sichuan province this month, Xi “once again reiterated that persistence is victory”.