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China's fragile economic recovery appears to be faltering. Reports from early Q2 indicate weakened consumer spending and underperformance in service sectors. Despite a considerable uptick in travel during the recent May holiday period—with 314 million domestic trips generating substantial revenue—per capita spending remains troublingly low, showing only a marginal improvement since last year.
The broader economic headwinds are significant, with the China General Services Business Activity Index reflecting sluggish growth and dropping business sentiment. The index has reached concerning levels not seen since the onset of the COVID-19 pandemic, suggesting deteriorating optimism among businesses due to the trade war's implications and reduced capital inflow to key sectors.