A New Slant on China’s Economic Troubles

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For three years running, Beijing has announced that the economy’s real economic growth has hit the officially targeted 5 percent figure. For 2026, Beijing has set a target of 4.5–5.0 percent.

Beijing claims the actual figures for 2023, 2024, and 2025 did not just come close to the target; they hit it spot on. For those who know economic data, this kind of precision alone is enough to raise suspicions of manipulation.

With these contradictions in mind, this column seeks to shed light on the overall economic situation through an admittedly incomplete survey of business and local government actions and plans. The picture that emerges is of a much weaker economy than Beijing’s target hitting suggests.

News from retail businesses is hardly encouraging. Food delivery companies report a sharp drop in demand, so pronounced in fact that one of the leaders in the area, Meituan, reported a loss in last year’s third quarter, the most recent period available.

The Swedish furniture maker and retailer, IKEA, recently announced that it will close seven of its 41 stores in China. That constitutes a not insignificant 16 percent of the company’s Chinese footprint. The closures span China, from shops in suburban Shanghai to Guangzhou, Tianjin, Nantong, Xuzhou, Ningbo, and Harbin. The cause, according to Ikea management, is the property crisis and the attendant decline in new-home purchases. IKEA had held out in the hope that the crisis was temporary, but now it has given up altogether on large-scale expansion in favor of a narrower and less ambitious focus on home remodeling.

Clothing retailing and wholesaling also look less than robust. Shanghai’s wholesale clothing market attests to the slow pace of sales. The market has long served as an intermediary between manufacturers and retailers, helping stock retail outlets with inventory on the proviso that it will take back anything that remains unsold. It reports that returns far outpace outward placements. A separate woman’s clothing wholesaler, Wang Jinging, reports that revenue last year was half the level of the previous year and that the beginning of 2026 does not look auspicious.

Troubles are more widespread than clothing. Corporate filings indicate shrinking profits across a wide range of industries, from steel and concrete to robotics and cosmetics. Of the 5,000 Chinese mainland companies tracked by FactSet, profit margins are at their lowest levels since 2009, during the Great Recession.

Electric vehicle (EVs) producers, despite Beijing’s emphasis, are having a hard time finding buyers. Dealers report having to cut prices drastically to make sales, sometimes even below costs. AVIC Lantian’s large Shanghai car dealer reports 2025 profits down 50 percent from the year before.

Nor is the problem just EVs, where it might be traced to excessive investment by Beijing in 2023 and 2024. China’s paper industry reports an 11 percent drop in profits in 2025 from 2024 and complains that circumstances have forced the industry into more debt than it would like.

Amid all this less-than-encouraging news from Chinese business, 13 of China’s 20 provincial governments—almost two-thirds—have reduced their growth targets for 2026. The manufacturing powerhouses of Guangdong and Zhejiang are among those toning down their expectations. These local governments seem at last to have given up on the optimism that they had maintained for years on the expectation that the ill effects of China’s property crisis and inadequate domestic demand would work themselves out.

Economists and scientists often warn that anecdotes are not evidence. The warning should be well taken. Anecdotes can be cherry-picked to support biases, whereas broad statistical measures are less susceptible to such manipulations. Here, in an effort to be balanced, a search for contrary announcements and actions failed to turn up much worth mentioning. Meanwhile, there is reason in China’s case to question the broad statistics issued by Beijing. If the anecdotes do not count as the kind of evidence economists and scientists would prefer, they are nonetheless an indication.