China economy weakens further in May as retail sales post first drop in over three years

China's retail sales contracted in May for the first time in more than three years, while urban investment declined more sharply than economists forecast, signaling the world's second-largest economy is losing momentum.

The May retail sales drop marks the first decline since early 2023, a concrete reversal in consumer demand that has propped up Chinese growth amid persistent property sector weakness. Urban investment fell at a pace exceeding analyst expectations, compounding concerns that domestic stimulus measures have failed to gain traction. The data arrives as Beijing attempts to stabilize growth without triggering a fresh debt spiral or currency depreciation.

China's economy faces headwinds from a multi-year property market downturn, elevated youth unemployment, and weakening export demand as global trade tensions persist. The retail sales contraction suggests Chinese households are pulling back on spending despite government efforts to boost consumption through subsidies and tax relief.