Asia in Focus China Retail Sales Policy Tailwinds Fade, H2 Growth Likely Remains Low

Economics Research 14 August 2026 | 5:33PM HKT

China Retail Sales: Policy Tailwinds Fade, H2 Growth Likely Remains Low

n China’s retail sales growth has slowed notably over the past year, with nominal Yuting Yang | growth falling from 5.0% yoy in H1 2025 to 2.5% yoy in H2 2025 and 1.3% yoy in Goldman Sachs (Asia) L.L.C. H1 2026. Real momentum was likely even weaker given higher CPI inflation. In this piece, we examine the key drivers of the slowdown and discuss implications for retail sales growth through the remainder of this year. n The government-subsidized consumer goods trade-in program, which boosted retail sales from late 2024, has become a drag. We estimate that tighter implementation, lower subsidy intensity, and front-loaded durable-goods demand subtracted around 90bp from H1 retail sales growth, while the scheduled step-down in NEV purchase-tax relief added another 30bp drag. n May and July were hotter than usual, while rainfall was above normal in March, April, and July. However, nationwide H1 weather conditions did not deviate meaningfully from historical averages, despite extreme conditions in some regions. Our regression analysis suggests abnormal weather helps explain some category-level sales, but has limited impact on headline retail sales. n On the back of the Iran War, vehicle fuel prices in China jumped by around 20%. However, Chinese households responded by purchasing 20% less fuel in March-June, leading to negligible total impact on nominal retail sales of petroleum products. Hence, lower energy prices are unlikely to boost overall retail sales in the coming months. n Taken together, China’s retail sales growth is likely to remain low in H2. More favorable base effects should add 70bp to year-over-year nominal retail sales growth in Q3 before base effects turn negative again in Q4. Fading support from the trade-in program will continue to depress retail sales growth through the rest of this year. With confidence and income expectations still low and property prices yet to find a bottom, we expect retail sales growth to average 1.7% yoy in H2, keeping 2026 full-year growth subdued at 1.5% yoy.

Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to

China Retail Sales: Policy Tailwinds Fade, H2 Growth Likely Remains Low

China’s economy has remained uneven this year. Resilient external demand and solid industrial activity have supported headline GDP growth, but domestic demand continues to lag, as the property downturn weighs on household balance sheets and confidence. The weakness is particularly visible in retail sales: nominal growth slowed to 1.3% yoy in H1, well below 5.0% in H1 last year (Exhibit 1). Moreover, nominal retail sales likely overstate the underlying consumption momentum, as higher inflation mechanically lifts reported sales1. Headline CPI rose to 1.0% yoy in H1 2026 from -0.1% in H1 2025, implying an even weaker real retail sales picture compared to the same period last year. In this piece, we examine the key drivers of the slowdown—including the tightening of the government-subsidized consumer goods trade-in program, the tax increase on new energy vehicle (NEV) purchases, weather distortions, and oil-price effects—and discuss the implications for retail sales growth through the remainder of this year.

Exhibit 1: Nominal retail sales growth has slowed notably since mid-2025

Percent, year-over-year Percent, year-over-year 20 20 China retail sales decomposition Catering 15 Offline Goods 15 Online Goods Headline 10 10

Source: NBS, Data compiled by Goldman Sachs Global Investment Research

Trade-in program: from a tailwind to a headwind

China officially launched the consumer goods trade-in program, or China’s “cash-for-clunkers”, in late April 2024, but the initial impact was modest given relatively low subsidy levels. Momentum improved after policymakers allocated RMB150bn of Central Government Special Bonds (CGSB) in late August 2024 and raised subsidy amounts meaningfully, supporting a significant pickup in auto and home-appliance sales in subsequent months…