Xi wants China to boost demand. Why isn’t it working?

China's economic activity is sputtering midway through 2026, undermining President Xi Jinping's efforts to boost domestic demand and galvanize the economy. Despite policy directives aimed at stimulating consumption and investment, key indicators suggest a persistent slowdown. Retail sales growth, a crucial measure of consumer spending, has shown a marked deceleration compared to earlier projections for the year. Similarly, industrial production, while showing some resilience, has not achieved the robust expansion anticipated by economic planners. This sluggish performance is attributed to a confluence of factors, including a prolonged property sector downturn, subdued consumer confidence, and lingering uncertainties in the global economic environment. The government's stimulus measures, such as targeted tax cuts and infrastructure spending initiatives, have not yet translated into a significant and sustained uplift in economic momentum. Analysts point to the need for more comprehensive reforms to address structural issues and rebuild confidence among both consumers and businesses. The current economic trajectory poses a challenge to China's growth targets for 2026 and raises concerns about the effectiveness of its current policy framework in navigating these complex economic headwinds. The ongoing property crisis, in particular, continues to cast a shadow, impacting household wealth and investment decisions, thereby dampening overall demand. The government's stated goal of shifting towards a consumption-driven growth model appears to be facing significant obstacles in the current economic climate.