China’s weak consumer becomes the world’s problem
A China-Africa liner carrying 23800 tons of mechanical equipment and engineering vehicles set sail from Yantai Port to Ghana, Yantai City, Shandong Province, China on September 3, 2026.
Cfoto | Future Publishing | Getty Images
Hi, this is Evelyn, writing to you from Singapore. Welcome to the latest edition of The China Connection — a snapshot of what I’m seeing and hearing from local businesses.
For a few years now, lackluster consumer spending has underpinned many conversations around China. Against persistent exports growth, the domestic sales challenge has become more stark — and globally relevant. Is there a solution?
The big story
Consumers in China have good reason to be cautious.
For years, their disposable income grew at more than twice the rate of consumers in the U.S. Wind data going back to 2003 shows that until 2020, people living in Chinese cities could expect around 10% or faster growth in disposable income every year, far above the 3% average in the U.S.
But that’s slowed drastically in the last several years to 4.3% in 2025, barely better than the U.S. at 3.8%.
Why the drop?
A big factor, Macquarie’s Larry Hu pointed out in a report Friday, is the sharp decline in home prices. Since their peak in 2021, property values have tumbled back to levels last seen in 2016, erasing 85% of the gains made during 2012 to 2021, Hu said.
That’s far sharper than the 47% home price drop during the U.S. housing bust, he said.
“History suggests that the outlook for China’s housing market depends much on exports,” Hu said, noting that “China’s housing market will bottom when policymakers can no longer rely on exports to drive growth.”
And that’s where the domestic challenges are attracting greater global scrutiny.
Group of 20 finance ministers’ meeting in the U.S. this month has now intensified the debate over whether China’s exports and economic policies have cost people in other countries their jobs.
The joint statement contained a thinly veiled call for China to “remove distortions that constrain domestic consumption.” Beijing objected to that paragraph and three others. It was the only dissenting G20 member, drawing criticism from U.S. Treasury Secretary Scott Bessent.
China’s imports surged in June at their fastest pace in five years. But that hasn’t been enough to meaningfully narrow its trade surplus, amid growing global demand for China-made parts used in data centers. A heat wave in Europe has also driven up air conditioning unit exports to the block by more than 40% to a record high, according to state media.
That has helped China’s exports staying strong, despite U.S. and EU tariffs, clocking their sharpest growth since 2021 in June, and beating estimates in July.
China didn’t purposely try to boost its exports, said Zong Liang, former chief researcher at the Bank of China. “Speaking from the heart, China at the beginning of this year did not anticipate this situation,” he said in Mandarin, translated by CNBC.
While Zong noted Beijing has…
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