China’s Consumer Recovery Still Looks Uneven

China's consumer recovery remains uneven despite a 2.4% year-on-year rise in retail sales during Q1 2026, with online and service consumption driving growth while broader domestic demand shows signs of stagnation. Bloomberg Intelligence’s Catherine Lim warns that retail sales could fall below 2% growth by year-end, citing weak consumer confidence and structural challenges. The real story lies in how tech giants like JD.com, Alibaba, and Tencent are investing in agentic AI for e-commerce — a costly pivot that’s already pressuring margins at Alibaba, where commerce margins dropped to a record low of 1.3%. JD.com stands out by maintaining record-high operating margins, not by chasing AI hype but by avoiding aggressive spending. Meanwhile, Tencent’s slowest revenue growth in six quarters highlights the difficulty of monetizing AI beyond advertising and WeChat ecosystem integration. The ongoing London High Court case between Shein and Temu over IP and anti-competition could reshape global supply chains, especially those reliant on Chinese manufacturing. Lim emphasizes that policy stimulus is unlikely to return, making consumer behavior shifts — particularly in luxury jewelry and outdoor sportswear — the key drivers of performance in 2026.