The economic data in May are like a prism, illuminating two aspects of the same Chinese economy: on the one hand, it is a “new” picture, with the added value of high-tech manufacturing growing by 15.1% year-on-year, and the electronics industry contributing the highest growth rate of 17.0% in the past five years; on the other hand, it is a “cooling” reality, with total retail sales of consumer goods falling by 0.6% year-on-year, and the single-month decline in fixed asset investment widening to 12.5%.
Revolving around this set of contradictions, the direction of follow-up macroeconomic control has become clear – it is not an increase in a single policy, but a simultaneous move in different dimensions, with each move targeting different structural pain points.
From the perspective of export enterprises, we must take advantage of the window period when external demand is still good to make up for the shortcomings of domestic demand.
Exports in May increased by 13.8% year-on-year, and exports of mechanical and electrical products increased by 18.4%. Foreign trade is still running fast.
But export companies themselves know that there is a question mark as to how long this high growth rate can last.
With global trade protectionism on the rise and central bank policy uncertainty in major economies increasing, any external disturbance may cause export orders to plummet.
In terms of macro-control, this means that now is not the time to “lay on winning”, but to use the time and space earned from exports to make up for the shortcomings of domestic demand.
From January to May, fixed asset investment fell by 4.1% year-on-year, and real estate development investment fell by 16.2%. If domestic demand cannot pick up, once external demand weakens, the economy will face pressure from both ends.
Therefore, the National Development and Reform Commission has made it clear that “strengthening the planning and construction of water networks, new power grids, computing power networks, new generation communication networks, urban underground pipe networks, logistics networks, etc.” is the focus of investment. At the same time, it will promote the implementation of the “double” and “two new” policies, and use government investment to stimulate the recovery of private investment.
This is not simply “releasing water”, but taking advantage of the window period for external demand to build a solid foundation for domestic demand.
For ordinary consumers, the key is whether the policy can make their wallets bulge and dare to spend money.
In May, retail sales turned negative, and retail sales of goods registered negative growth for two consecutive months. The growth rates of categories such as tobacco, alcoholic drinks, and communication equipment dropped significantly.
But what is interesting is that from January to May, retail sales of services increased by 5.4% year-on-year, and the popularity of catering, accommodation, and travel has not diminished.
This shows that consumers are not short of money, but are cautious in their expectations for the future and have obvious selective consumption – they are willing to pay for experiences, but large-ticket items and optional consumption are shrinking.
From this perspective, simple consumption coupons or subsidies have limited effect.
Relevant experts from the National Development Institute of the National People’s Congress pointed out that to boost domestic demand and address the root cause, “investing in people” must be combined with increasing residents’ disposable income and reducing the cost of childbirth and childcare.
To put it bluntly, only when employment is stable, income expectations improve, and the social security net becomes denser can people dare to spend their savings.
The policy side is already responding to this: the deficit rate is set at 4% in 2026, general public budget expenditures reach 30 trillion yuan for the first time, and ultra-long-term special national debt is tilted towards consumption and people’s livelihood.
But the key lies in whether the money can accurately fall into the pockets of residents instead of idling in the financial system.
From the perspective of policymakers, structural tools are more important than total easing, and “precision drip irrigation” is the essence.
The PPI-CPI scissor gap widened to 2.7 percentage points in May. Upstream raw material prices soared, but downstream terminal prices failed to rise. The profits of midstream and downstream companies were squeezed by both ends.
At this time, if there is a flood of interest rate cuts and reserve requirement ratio cuts, funds will most likely flow to asset-heavy industries with mortgage capabilities, and it will be more difficult for small and medium-sized enterprises and manufacturing industries that are really short of money to get them.
So the signal released by the central bank at the Lujiazui Forum is very clear: narrowing the overnight repurchase interest rate corridor to 50bp, creating overseas central bank repurchase tools, and studying non-bank liquidity tools for specific scenarios. These are all improving the monetary policy transmission mechanism, rather than simply cutting interest rates.
Huang Yiping, dean of Peking University’s National School of Development, also emphasized that the current economy is a structural problem of “strong supply and weak demand”, and macroeconomic policies must be precise and effective, and cannot rely solely on total expansion.
At the operational level, this logic means that fiscal, monetary, industrial, and employment policies work together to use structural tools (such as re-loans to support agriculture and small businesses, re-loans to private enterprises) to direct money to the areas that are most needed – small and micro enterprises, manufacturing upgrades, and technological innovation.
When the three perspectives are put together, the core direction of macro-control comes out.
The perspective of export companies tells us that we must take advantage of the window period to increase investment and make up for the shortcomings of domestic demand; the perspective of consumers tells us that we must repair residents’ balance sheets and increase consumption tendencies; the perspective of policymakers tells us that tools must be precise, mechanisms must be smooth, and transmission must be effective.
The convergence of the three is exactly the logic of the current policy combination: to stabilize aggregate demand with infrastructure investment such as “Six Networks”, to stabilize aggregate supply with “artificial intelligence +” and high-tech manufacturing to cultivate new productive forces, to unify the large market construction and anti-involution rectification to clear the economic cycle, and to respond to uncertainty with precise structural tools and incremental policy reserves.
It is worth noting that from January to May, investment in high-tech industries increased by 4.5% year-on-year, and investment in integrated circuit manufacturing and lithium-ion battery manufacturing increased by 11% and 24.9% respectively.
These figures show that even against the backdrop of an overall decline in investment, funds are still tilting toward new drivers.
What the policy needs to do is to make this structural tilt smoother and more efficient, while preventing the differentiation of “new strong and old weak” from excessively tearing economic resilience.
Taken together, follow-up macro-control is not about choosing between “maintaining growth” and “adjusting structure,” but rather using structural tools to accelerate the conversion of old and new momentum while stabilizing the fundamentals of aggregate demand.
The success or failure of this strategy depends on three key variables: whether residents’ consumer confidence can rebound as employment and income improve, whether real estate development investment can stop falling and stabilize under the guidance of stock revitalization and interest rates, and whether the external environment allows for this transformation window.
The current policy toolbox is fully equipped with ammunition, and the next step is to test the implementation speed and transmission efficiency.
