China's economy experienced a setback in May as industrial output and retail sales growth missed expectations, indicating that the post-pandemic recovery may be unstable and requiring Beijing to take more measures to bolster it.
The country's central bank has already cut some key interest rates for the first time in almost a year, with more expected. The disappointing data suggests significant downside risks to GDP growth forecasts for 2023 and 2024.
The weak figures reflect insufficient domestic demand, sluggish external demand, and deflationary risks. They also highlight the need for more stimulus to address local government debts, youth unemployment, and weakening global demand.
Despite analysts' expectations for a stronger rebound, data ranging from factory surveys and trade to loan growth and home sales have shown signs of weakness. The government has set a modest GDP growth target of around 5% for this year, after badly missing the 2022 goal.
