【Epoch Times, August 28, 2025】Due to overcapacity and weak domestic demand, the Chinese economy has been experiencing the longest period of monetary contraction since the 1990s. In an effort to dilute the impression of consumption tightening, the Beijing authorities have started to embellish consumption growth data, reporting an average increase of 1.0 percentage points per month starting from 2025, following their practices of beautifying GDP and unemployment data.
In recent years, the Beijing authorities have stopped publicly releasing data on land transfers, foreign investments, and unemployment rates, but the total social retail sales of consumer goods remain an exception.
Among the various economic indicators, total social retail sales of consumer goods are often seen as one of the indicators to evaluate residents’ consumption. Since the outbreak of the pandemic, the data on social retail sales have fluctuated greatly, especially in first-tier cities.
On August 25, a recent report led by researcher Wang Guochen from the China Economic Research Institute revealed that from 2003 to 2009, 31 provinces and cities in mainland China issued monthly total social retail sales and annual growth rates. Since then, many provinces and cities have switched to quarterly releases, with some only publishing annual total consumption figures. However, in the first half of 2025, the ratio of provinces and cities that released total sales and annual growth rates on a monthly basis rose to 80.6%.
Wang Guochen, a researcher at the China Economic Research Institute, stated to Epoch Times that in recent years, the Chinese Communist Party has been tightening the release of data extensively. However, the release of data on total social retail sales of consumer goods is somewhat contradictory, as it reflects Beijing’s emphasis on consumption. This data has become a key performance indicator (KPI), indicating that provinces and cities are also catering to the demands of the Beijing authorities.
“In fact, this is also a facade for the outside world to see,” he said.
The report indicated that in the first quarter of 2024, the average annual growth of total consumer goods retail sales in the 31 provinces and cities significantly differed from the data released by the National Bureau of Statistics. However, by the second quarter of 2025, the discrepancy between the two had gradually narrowed and converged to zero by the first half of 2025.
Wang Guochen pointed out that the data from the central government and localities in mainland China are usually incompatible. “But what we have found is that whether it’s the annual growth rate or the total consumer goods retail sales, the gap between the two is getting smaller.”
He stated that it seems like the central government is adjusting the gap between the data from the central government and localities, with some regions over-reporting and some under-reporting. “However, both the central government and localities have errors, and in the end, the two wrong things can be pieced together to be consistent, so I say it creates a data illusion.”
Starting from 2025, the National Bureau of Statistics of the Chinese Communist Party has begun to inflate consumption growth data.
The report showed that from August 2022 to December 2024, the actual annual growth rate of total social retail sales of consumer goods matched the data released by the National Bureau of Statistics of the Chinese Communist Party. However, in 2025, discrepancies began to emerge between the two. In the period from March to July 2025, the Chinese Communist Party overestimated consumption growth for five consecutive months.
For example, in July, the total social retail sales in mainland China amounted to 3.9 trillion RMB, with an actual year-on-year increase of 2.7% compared to the same period of the previous year. However, the official statistics reported 3.7%, exceeding by 1.0 percentage point.
In other months, the consumption growth rates were artificially increased by 1.0 percentage point (March: adjusted from 3.7% to 4.7%; April: adjusted from 4.9% to 5.9%; May: adjusted from 4.1% to 5.1%; June: adjusted from 3.8% to 4.8%).
Wang Guochen mentioned that in the past few years, the data for the current year and the previous year calculated based on the annual growth rate formula matched the figures published by the National Bureau of Statistics. However, this year, although it should have been 4%, they insist on reporting 5%, which is essentially inflating the figures to make consumption in mainland China appear slightly better, creating the biggest statistical joke.
“This kind of inflation, I believe, is related to Beijing authorities’ emphasis this year on expanding consumption, such as the ‘dual control and dual guarantees’ (referring to the implementation of major national strategies and security capacity building in key areas. The so-called ‘dual guarantees’ refer to promoting a new round of large-scale equipment renewal and consumer goods upgrading), or even the consumer loans that will be promoted in the second half of the year, all related to consumption.”
“Therefore, under this pressure, the National Bureau of Statistics has no choice but to inflate the figures.”
The report highlighted that 15 provinces and cities overestimated consumption growth by an average of 6.0 percentage points, while 12 provinces and cities underestimated it by an average of 5.4 percentage points. In the first half of 2025, Henan province’s total social retail sales of consumer goods amounted to 1.4 trillion RMB, with an actual year-on-year increase of 7.2% compared to the same period of the previous year, making it the only province in line with official statistics.
Wang Guochen pointed out that in the past, it was common to hear that local officials would exaggerate data to boost GDP for their career advancement. However, among the 31 provinces and cities, 12 have started underreporting data, which is unprecedented and makes the data look so unattractive. Don’t they want to advance in their careers?
“I think the more urgent reason is that these provinces and cities do not want to pay taxes to the central government because the localities are already poor enough. By beautifying the data further, they would have to pay more taxes to the central government.”
“I believe this is a new phenomenon that actually reflects the local resistance towards the Beijing authorities.”
The report indicated that in the first half of 2025, the actual annual decrease in total consumer goods retail sales in Beijing, Shanghai, Guangzhou, and Shenzhen was 4.4%, with two consecutive quarters of negative growth. The actual annual increase in total consumer goods retail sales in 28 provinces and cities was 4.2%, ending the trend of consecutive growth in two quarters.
Wang Guochen expressed that the consumption decline in China’s four most important first-tier cities, Beijing, Shanghai, Guangzhou, and Shenzhen, poses a question on how the overall Chinese consumption could still be growing by 5%. “I believe that there are issues behind the data provided by the central government.”
“Of course, some may argue that some of the consumption momentum in Beijing, Shanghai, Guangzhou, and Shenzhen has shifted to other provinces and cities, which is likely to happen. However, these four major cities are crucial in China, and their decline actually represents the economic or consumption decline in China.”
“The mainland China’s manufacturing industry is struggling, and the financial industry is not performing well, which will be first reflected in these four major cities.”
Wang Guochen stated that the ongoing contraction throughout mainland China will continue to spiral downwards. If people do not consume, the products produced will not be sold. When products cannot be sold, it leads to issues in the profitability of companies. In this situation, mainland China has witnessed an increase in zombie enterprises.
He explained that if a company’s products cannot be sold, it can only continuously reduce salaries because the Chinese Communist Party, in order to stabilize employment, must ensure the stability of zombie enterprises and at least avoid layoffs. As people’s salaries or expected income decrease, they will be less willing to consume. People are now realizing that this situation will worsen over time.
Wang Guochen said that the first half of this year is crucial, as there are new policies that push the consumption momentum from the second half of this year to even the next year to be spent in the first half of this year. Yet, in the entire first half of the year, consumption in 28 provinces and cities continued to decline. Therefore, it’s imaginable how bleak the consumption will be in the second half of this year.
“In such a dire situation, the problems of overcapacity, zombie companies, and non-performing loans in banks will only worsen.”
A recent report by Nikkei Asia highlighted in China, the phenomenon of excessive price reductions accompanying economic stagnation is becoming increasingly evident. On daily delivery apps used by the public, services that provide products for free have even emerged, with premium wines and branded goods witnessing price reductions. The deflationary pressures reflected in recent price statistics are akin to Japan’s experience after the 2011 Great East Japan Earthquake, accompanied by the strengthening of the Japanese yen.
“I’m not so optimistic,” said Wang Guochen. The “Japanization” refers to a sluggish economy lasting 30 years, called Japanese-style. However, Japan’s economy did not collapse despite being in a long slump and experienced no financial crisis. This is because Japan’s technological advancements before the economic bubble burst were already at a high level, and the people had high incomes. More importantly, Japanese companies not investing domestically did not mean they had no money; in fact, there was a wave of significant overseas investments by Japanese companies at that time.
“Though Japan’s economy declined for 30 years, Japan wasn’t broke domestically. They had a strong foundation and substantial investments overseas.”
Wang Guochen explained that China is different, as Premier Li Keqiang mentioned that there are still 600 million people earning less than 1,000 RMB a month. Debt is prevalent everywhere in China, not assets. If deflation persists, a financial crisis will inevitably occur. It will not be a low-key situation like Japan, which avoided a financial crisis despite being in a slump; a crisis in China could erupt suddenly, similar to the Soviet model.
“Many increasingly believe that China may follow the Soviet model, where you never know which day in some year a financial or political crisis may erupt.”