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China's consumer spending slump: A global concern?
8 Sep
Summary
- Chinese urban disposable income growth slowed drastically since 2020.
- Property values have tumbled, erasing most gains since 2012.
- China faces international pressure to boost domestic consumption.
Chinese urban consumers, once experiencing rapid income growth, are now facing a significant slowdown. Between 2003 and 2020, disposable income grew at over 10% annually, more than double the U.S. rate. However, this growth has dramatically decelerated to 4.3% in 2025, nearly matching the U.S. pace.
The primary driver behind this change is a severe real estate slump. Property values have fallen sharply since their 2021 peak, reverting to 2016 levels and wiping out most gains from the prior decade. This downturn is considerably more pronounced than the U.S. housing bust.
Globally, China's persistent export growth contrasts with its weak domestic sales, attracting international attention. At a recent G20 meeting, China objected to calls for reforms to "remove distortions that constrain domestic consumption." Despite a surge in imports in June 2026, the trade surplus remains substantial due to demand for Chinese manufactured goods.
While China's exports have remained strong, former Bank of China researcher Zong Liang noted that the country did not anticipate the current situation and boosting domestic demand may take up to five years. Encouraging investment in the stock market is one potential avenue, but past market crashes have created investor caution. Cultural preferences for saving and prioritizing education, healthcare, and travel over discretionary spending also impact retail sales.
