A bifurcated economy where technology thrives while everything else treads water
China's 618 shopping festival, long regarded as a reliable pulse of domestic consumer vitality, has returned a sobering reading: online sales grew just 4% where they once grew at nearly four times that pace. The divergence unfolding across the Chinese economy — exports and artificial intelligence ascending while households and property markets stagnate — speaks to a deeper tension between the sectors a nation builds for the world and the confidence it must cultivate at home. What Beijing faces now is not merely a slowdown in spending, but a question about whether prosperity concentrated in technology can find its way into the daily lives of ordinary citizens.
- The 618 festival's growth collapsed from 15.2% to just 4% year-over-year, and May's retail sales posted their first contraction since pandemic lockdowns ended in 2022 — the warning lights are no longer subtle.
- Consumers are trading down rather than up: secondhand electronics surged 80% while the appliance boom fueled by last year's state subsidies has evaporated entirely, revealing a household sector quietly tightening its belt.
- A bifurcated economy is hardening — AI, high-tech, and exports are accelerating while property markets and consumer spending remain mired, and Goldman Sachs has already trimmed its Q2 GDP forecast to 4.5% in response.
- Goldman Sachs warns that AI-driven job displacement could become a compounding force, threatening to delay the very property and consumption recovery that China's broader stabilization depends upon.
Beijing's 618 shopping festival, one of the year's most closely watched consumer events, has delivered an uncomfortable verdict on the state of Chinese household confidence. Total online sales across the mid-May to mid-June period reached 934 billion yuan — roughly $137.86 billion — but grew only 4%, a sharp retreat from last year's 15.2% expansion. In May alone, retail sales fell 0.6% year-over-year, the first such contraction since China emerged from pandemic lockdowns in 2022.
The e-commerce segment itself grew just 0.9%, suggesting that the familiar cycle of promotional blitzes and discount wars is losing its power to move consumers. Alibaba's Tmall led among platforms, followed by JD.com and ByteDance's Douyin, but none could escape the broader gravitational pull of caution. Secondhand electronics sales jumped nearly 80%, a telling sign that shoppers are trading down rather than upgrading. With last year's state appliance subsidies gone — subsidies that had sparked a 400% surge in home appliance purchases — spending shifted toward personal services: home cleaning, fashion, beauty, and health supplements. WPIC's Jacob Cooke observed that consumers are investing in themselves and in experiences rather than in durable goods.
Yet the optimism embedded in those shifts runs into a harder structural reality. Goldman Sachs economist Hui Shan highlighted the widening divergence between China's thriving high-tech and export sectors and its struggling property market and household consumption. The firm lowered its second-quarter GDP growth forecast to 4.5%, and Shan raised a more unsettling concern: that AI-related job displacement could compound existing headwinds, further delaying the rebound in property and consumer spending that the broader economy urgently needs. The 618 festival, designed to celebrate abundance, has instead become a precise instrument for measuring restraint.
Beijing's annual 618 shopping festival, one of the year's biggest online spending events, just delivered a stark message about the state of Chinese consumer confidence. From mid-May through mid-June, total online sales during the festival grew just 4% compared to the same period last year. A year ago, that figure was 15.2%. The deceleration is sharp enough to worry economists watching China's broader economic health.
The numbers matter because they reveal a widening crack in China's economy. While exports have strengthened and technology sectors have surged, household spending—the engine that should power sustained growth—remains sluggish. In May alone, retail sales fell 0.6% year-over-year, marking the first contraction since China reopened after pandemic lockdowns in 2022. That's the kind of data point that gets circled in red at central banks and investment firms.
Retail data firm Syntun, which tracked the 618 festival, calculated total online sales at 934 billion yuan, roughly $137.86 billion. That figure includes same-day delivery orders and group purchases. Among the major platforms, Alibaba's Tmall dominated, followed by JD.com and ByteDance's Douyin. But even the e-commerce segment itself grew only 0.9%—a telling sign that the usual promotional blitz and discount wars are no longer moving consumers the way they once did.
There were pockets of brightness. Secondhand electronics sales jumped nearly 80% during the festival period, suggesting consumers are trading down to cheaper goods rather than buying new. Last year, state subsidies had sparked a 400% surge in home appliance sales as the government encouraged people to upgrade. This year, those subsidies are gone, and the spending pattern shifted. Instead of appliances, demand surged for home cleaning services, fashion, beauty products, and health supplements. Jacob Cooke, CEO of WPIC, noted the shift on CNBC: people are investing in themselves—looking good, staying healthy—and wanting to get out and experience the world again. There's also been a spike in AI-related hardware sales, and e-commerce platforms are using AI tools to boost brands' profit margins.
But here's where the optimism hits a wall. Goldman Sachs' Hui Shan pointed out the troubling divergence: high-tech and AI sectors are pulling away from property and consumption. The firm lowered its forecast for second-quarter GDP growth to 4.5% from a previous estimate of 4.7%, citing weakness in household spending. More ominously, Shan warned that AI-related job displacement could amplify economic headwinds and potentially derail the recovery in China's property market and consumer spending—the very sectors that need to rebound for the economy to stabilize.
What's happening is a bifurcated economy. Technology and exports are thriving. Everything else is treading water. The 618 festival, meant to be a barometer of consumer health, is instead flashing a warning light. Consumers are spending, but cautiously, selectively, and far more slowly than they were just twelve months ago.
Citas Notables
The divergence between high-tech/AI and property/consumption continues to widen in both industrial production and capital market data— Hui Shan, Goldman Sachs
People are taking good care of themselves, they're looking good, and they want to go out and experience the world— Jacob Cooke, CEO of WPIC, on shifting consumer spending patterns
La Conversación del Hearth Otra perspectiva de la historia
Why does a shopping festival in China matter to anyone outside China?
Because China's consumers are 1.4 billion people. When they stop spending, it ripples through global supply chains, commodity prices, and growth forecasts everywhere. This 618 festival is one of the clearest windows into whether ordinary Chinese households feel confident enough to open their wallets.
But 4% growth still sounds positive. Why is that bad?
It's the direction that matters. You go from 15% growth to 4% growth, that's not a slowdown—that's a cliff. It tells you something shifted in how people feel about their future. They're not buying the things they used to buy.
What are they buying instead?
Cheaper versions of things. Used electronics instead of new ones. Services that make them feel good—beauty, health, cleaning. It's the spending pattern of someone who's uncertain, who's being careful with money.
Is this about the property market?
Partly. China's property sector has been struggling for years. When people feel their biggest asset—their home—is losing value, they tighten spending everywhere else. That psychology is real and it's persistent.
What's the AI angle here?
AI is booming in China, creating new jobs and new profit opportunities for tech companies. But Goldman Sachs is worried that AI will displace workers faster than new jobs appear. If that happens, you get more people with less money to spend, which makes the consumer spending problem worse, not better.
So the economy is splitting in two?
Exactly. One part—technology, exports—is thriving. The other part—property, household consumption—is stuck. That's not a stable position long-term.