China’s retail sales in May grew at their fastest rate since late 2023, data from National Bureau of Statistics showed Monday, in part helped by Labor Day and Dragon Boat holidays.

Retail sales last month jumped 6.4% from a year earlier, sharply beating analysts’ estimates for a 5% growth in a Reuters poll and rising from the 5.1% growth in the previous month.

Growth in industrial output slowed to 5.8% year on year in May from 6.1% in the prior month. The latest reading came in slightly weaker than analysts’ expectations for a 5.9% rise.

Fixed-asset investment, reported on a year-to-date basis, expanded 3.7% as of May from a year earlier, undershooting Reuters’ forecast for a 3.9% growth and slowing from a 4% growth in the first four months.

The urban survey-based unemployment rate in May came in at 5.0%, easing from 5.1% in April to the lowest level since November last year.

A tariff deal reached by Beijing and Washington in mid-May gave temporary relief to the country’s exports, prompting some businesses to frontload shipment while doubling down on alternative markets. Both sides struck a 90-day truce to roll back most of the triple-digit levies added on each other’s goods in early April.

Commerce Secretary Howard Lutnick told CNBC last week that U.S. tariffs on Chinese imports will stay at their current level of 55%.

China’s exports grew less than expected in May, though surging shipments to Southeast Asian nations, European Union countries and Africa helped offset the sharp decline in U.S.-bound goods. China’s exports to the U.S. plunged over 34% from a year ago, their sharpest drop since February 2020.

The past two months’ trade data indicated resilience in China’s exports, according to Goldman Sachs, as they highlighted “the difficulty for bilateral tariffs to meaningfully reduce total Chinese exports.”

Sluggish domestic demand stuck out as a more pressing issue for Chinese policymakers. Consumer prices have seen an year-on-year decline for four consecutive months, slumping 0.1% in May. Deflation in the factory-gate or producer prices has also deepened, falling 3.3% from a year ago.

However, Beijing may feel less urgency in rolling out additional easing steps as exports appear more resilient than expected and the GDP growth is on track to exceed 5% in the first half-year, Goldman said.

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BEIJING — China’s consumer spending shows little sign of picking up soon, given uncertainty about future wealth, changing preferences and lack of a social safety net.

It’s been four straight months of declining consumer prices, consumer confidence is hovering near historic lows, and the real estate market is struggling to turn around. Analysts repeatedly point to one main factor: stagnant income.

Disposable income in China has halved its pace of growth since the pandemic hit in 2020, now growing only by an average of 5% a year, Jeremy Stevens, Beijing-based Asia economist at Standard Bank, said in a report Wednesday.

Most jobs aren’t giving much of a raise. Out of 16 sectors, only three — mining, utilities and information technology services — have seen wage growth exceed that of gross domestic product since 2020, he said.

Monthly business surveys for May showed contraction in the labor market across the board, especially as factories navigate U.S. tariffs. The unemployment rate among young people aged 16 to 24 and not in school remained high in April at 15.8%. The official jobless rate in cities has hovered around 5%.

A record high of 64% Chinese households said in the third quarter of 2024 that they would rather save money rather than spend or invest it, according to a quarterly survey by the People’s Bank of China.

While that moderated to 61.4% in the fourth quarter, according to the latest survey released in March, it reflected a trend of more than 60% of respondents preferring to save that’s been recorded since late 2023.

And for the respondents who planned to increase spending, education was the top category, followed by health care and tourism, according to the PBOC’s fourth-quarter survey released in March.

More than half of respondents viewed the job market as becoming more difficult or hard to tell.

People in China have been culturally inclined to save, especially since limited insurance coverage means individuals must often bear most of the cost of a hospital treatment, higher education and retirement. The real estate slump of the last few years has also weighed on spending since property accounts for most of household wealth in China.

One way to make people more willing to spend is to more than double pension payouts, by increasing the share of state assets paid to the Ministry of Finance, Luo Zhiheng, chief economist at Yuekai Securities, said in a note.

He added that increasing public holidays and offering services sector consumption vouchers could also help.

In the last few weeks, Chinese authorities have stepped up plans to further support employment and improve social welfare. But policymakers have avoided the mass cash handouts that the U.S. and Hong Kong gave residents to stimulate spending after the pandemic.

Coming out of the pandemic, analysts cautioned that retail sales in China would recover very slowly as major uncertainties for consumers remained unresolved.

In the decade before the pandemic, “Chinese consumers were willing and able to buy any innovation, even innovations that were not that really innovations,” said Bruno Lannes, Shanghai-based senior partner with Bain & Company’s consumer products and retail practices.

“In today’s world they are more rational. They know what they want,” he said on a webinar Thursday.

China is scheduled to report retail sales for May on Monday. Analysts polled by Reuters predict a slowdown to 4.9% year-on-year growth, down from 5.1% in April.

For a sense of the disparity, rural per capita disposable income has been less than half that of cities for years, according to official data. Per capita disposable income in urban areas last year was 54,188 yuan ($7,553). That’s far less than the $64,474 reported for the U.S. as of December.

Standard Bank’s Stevens pointed out that the ratio of consumption to income in rural areas has “substantially increased” and surpassed pre-pandemic levels, while that of urban households has declined. But he noted that lower-income households don’t have the scale of wealth that higher-income groups do in order to meaningfully increase consumption in the near term.

The top 20% accounts for half of total income and consumption in China, and 60% of total savings, he said. “Policy support for low-income groups, while well-meaning, is insufficient without structural wage reform.”

In addition, China’s “common prosperity” rhetoric “has introduced institutional realignments and policy shifts that, while well-intentioned, have added to the uncertainty,” Stevens said, noting the changes have “yet to fully find a new equilibrium.”

The S&P 500 is less than 3% from an all-time high. Six of its 11 sectors are within 5% of an all-time high. But even as the U.S. stock market index proves its resilience during a volatile stretch for investors, more money from within portfolios is expected to shift in to privately traded companies.

Jan Van Eck, CEO of ETF and mutual fund manager VanEck, says the trend of companies staying private for longer rather than seeking an initial public offering is here to stay and it offers new opportunities.

High-profile examples include Elon Musk’s SpaceX, Sam Altman’s OpenAI and fintech Stripe.

According to Van Eck, allocations to private assets will jump from a current average portfolio holding level of approximately 2% to 10% in the years ahead.

Some ETFs have begun to invest small portions of their assets in privately held company shares, including SpaceX, such as the ERShares Private-Public Crossover ETF (XOVR). VanEck has launched an ETF tackling the private opportunity in a different way: taking big positions in the publicly traded shares of the investment giants, including private equity firms and other alternative asset managers, that own many private companies.

The VanEck Alternative Asset Manager ETF (GPZ), which launched this month, has a portfolio holdings list that includes Brookfield, Blackstone, KKR, Brookfield Asset Management and Apollo, which combined make up almost 50% of the fund. TPG, Ares and Carlyle are also big positions, in the 5% range each.

The new ETF extends an existing focus on private markets for VanEck. For over a decade, it has offered investors access to private credit, through the VanEck BDC Income ETF (BIZD), which invests in the business development companies that lend to small- and mid-sized private companies. That ETF has a high level of exposure to Ares, Blue Owl, Blackstone, Main Street and Golub Capital, which make up about half of the fund. It pays a hefty dividend of 11%. 

“You have to believe this is a secular trend and growth will be higher than that for normal money managers, including ETF and mutual fund managers,” said Van Eck.

He cautions, however, there is more volatility in these funds compared to the public equity market overall.  “You have to size it appropriately,” he added.