China’s retail sales, factory activity lagged in July

China's retail sales and factory activity slowed in July, falling short of forecasts, according to official statistics released on Monday. The weaker performance highlights the ongoing challenges facing the world's second-largest economy as it aims to achieve annual growth of 4.5-5.0 percent. Retail sales increased by 0.6 percent month-over-month, significantly below the 1.5 percent forecast and a decline from the 1 percent growth observed in June.

Industrial production growth also decelerated to 4.5 percent on-year, down from 5.3 percent in the previous month and below the 5 percent forecast.

NBS spokesman Fu Linghui cited international geopolitical conflicts and a volatile global energy market as factors contributing to the July slowdown. Severe weather events in some regions were also mentioned as impacting the economy. Despite these headwinds, authorities claimed they had taken steps to address internal and external risks.

The weak data suggests the economy may encounter further downside risks, according to Zhiwei Zhang, President and Chief Economist at Pinpoint Asset Management. Zhang noted that while the Politburo has pledged stronger fiscal spending, its implementation and transmission may take time. Many economists believe China needs to transition toward a growth model more reliant on household spending rather than past drivers such as real estate and infrastructure investment.

Recent trade data showed exports and imports both rising, driven by overseas demand for AI-related technology products. This export boom has helped support China's manufacturing sector amid persistent domestic consumption weakness.