bit grim.  Thus, the national government had a pleasant surprise in store when it released May retail sales data last week: sales are kicking up now at a faster rate. That’s the good news. The caveat: the government itself is doing a lot of that heavy lifting to get retail sales up there, and it remains to be seen if sales are still this buoyant when intervention from Beijing dries up. First, though, the numbers: May sales rose by 6.4 per cent, year on year, the best monthly increase since late 2023, raising the January-May cumulative increase to 5.0 per cent. If you subtract out automotive sales, which have been flat all year, the picture is even better, with May year-on-year growth of 7.0 per cent and a January-May cumulative increase of 5.6 per cent. What’s all that talk about deflation then? Well, unfortunately, it hasn’t gone away, but at least the monster is being held at bay. The government’s trade-in scheme is driving sales growth There are some clear winners among the retail categories. The biggest one is a category that ordinarily would be struggling in a fragile economy: household appliances and audio-visual equipment, which was up 53 per cent in May and more than 30 per cent, year-to-date. This, of course, is on account of the government’s trade-in program, whereby consumers get subsidies on new products if they trade in their existing ones. The level of the subsidy varies according to the product, but is generally in the area of 15-20 per cent of the sale price of the new item. The program has reportedly been so successful that by mid-June some regions of the country had run out of subsidy money and had suspended their local programs while awaiting fresh cash injections. The 618 event helped drive sales The other thing that drove sales growth in May and undergirded the trade-in program was the 618 e-commerce festival. June 18 is the anniversary of the founding of JD.com, which was the original platform for the event. Now, however, other e-commerce platforms have jumped in on the act, and the festival has been lengthened to more than a month, making it an extended (perhaps over-extended) jamboree of promotions. Aside from the appliances and audio-visual products, other categories that have been big winners from both the trade-in program and the 618 festival are communication devices, which is to say phones, which were belatedly included in the trade-in scheme (+33 per cent for May and 27 per cent year-to-date), cultural and office supplies (31 per cent and 26 per cent), sporting and entertainment goods (28 per cent and 26 per cent), furniture (26 per cent and 21 per cent) and jewellery (22 per cent and 12 per cent). Food sales were also on an upward trajectory (15 per cent and 13 per cent).   What are the global players in China saying? Previously, Walmart had reported that its year-on-year sales in China rose by 22.5 per cent on a constant currency basis, to US$6.7 billion, for the period ending April 30. That included comparable-store sales growth of 16.8 per cent. The platforms that drove growth, as has been the case for a long time now, were Sam’s Club and e-commerce. Membership growth at Sam’s in China is going crazy, up 40 per cent. Walmart now has 50 clubs in China, and CEO Doug McMillon told investors that “all 50 of the clubs are performing well and we have more to come”. Walmart now operates about 340 stores in China, including the 50 Sam’s Clubs. Walmart’s results through April were a harbinger of the improvement in business for retailers that has picked up steam steadily throughout the year and culminated in May’s strong retail business. It would be surprising for Walmart itself not to produce strong top-line results in China in its second fiscal quarter, ending July. Meanwhile, the premium end is struggling One of the key drivers on the demand side for Walmart in China has been the value focus of Chinese consumers, so it is interesting to contrast Walmart with what is happening on the premium end of the market. Here, the story is not as positive, and some global brands operating in China are finding that value focus to be an Achilles’ heel. One of these is Starbucks, whose second-quarter results are not yet available but whose nearly 8000 stores in China had a poor first quarter, with same-store sales falling 11 per cent. The coffee segment is much in flux, with Starbucks (and everyone else) operating on an increasingly competitive playing field that will take time to stabilise.  Initially, Starbucks appeared to hold fast to the premium end of the market by maintaining its prices, but as Inside Retail reported on June 17, it is easing those prices down a little in the face of a more value-oriented Chinese consumer, while at the same time looking for a strategic local partner. The latter, it is hoped, will make Starbucks better able to meet the competitive challenge posed by local behemoths like Luckin and Cotti. Government reporting ‘general stability’ The government’s latest economic release, on June 16, characterised the economic situation as “generally stable”, with the boom in retail sales presented as the centrepiece of its evidence. However, pricing pressure on retailers remains high, and consumer prices have barely moved in the first half of the year. (Actually, the CPI is down 0.1 per cent on the year, but would be up by 0.4 per cent if food and energy are excluded.) Although retail sales growth is likely to be buoyant again in June, the sustainability of this mini-revival during the past few months will be put to a big test when the July results come out, and we will know to what extent the 618 festival brought transactions forward that would have occurred later anyway.