What: China’s retail growth is slowing as government trade-in incentives fade and property market stress undermines consumer demand.

Why it is important: The slowdown highlights the vulnerability of retail growth to macroeconomic pressures and evolving consumer behaviour.

China’s retail sector is witnessing a marked deceleration in growth, despite the government’s extensive trade-in schemes and stimulus measures. The initial surge in sales, particularly in home appliances and audio equipment, was largely driven by these incentives, but as the effects wane, underlying economic weaknesses have become more apparent. The property market’s ongoing distress, coupled with rising unemployment and renewed tariff tensions, has eroded consumer confidence, resulting in only modest gains in retail categories most directly supported by policy. The competitive landscape in China’s coffee and catering market is also evolving, with international brands like Starbucks and Luckin adapting their strategies to local tastes, especially in lower-tier cities. Meanwhile, Chinese consumers are increasingly prioritising value, rapid delivery, and investment-oriented purchases such as precious metals, reflecting both economic caution and a search for tangible returns. Global retailers like Walmart and Sam’s Club have responded by leveraging digital integration and membership models, setting new standards for efficiency and customer experience in the market.

IADS Notes: In May 2025, Xinhuanet reported that China’s retail sales growth was significantly boosted by government trade-in programmes, especially in durable goods. However, by December 2025, Bloomberg highlighted that the sector faced renewed risks as property market stress and macroeconomic uncertainty undermined consumer demand, despite ongoing stimulus. March 2025 coverage in BoF detailed how international brands were intensifying competition in lower-tier cities, adapting strategies to local preferences. In January 2026, WWD emphasised the increasing importance of value-driven and experiential retail among Chinese consumers. Finally, MBS in December 2025 showcased Walmart’s Sam’s Club as a model of successful adaptation, leveraging digital innovation and a membership model to drive growth and set new standards in operational efficiency.

Why is China’s retail growth losing momentum despite government incentives?