Consumer spending in China has significantly declined, with disposable income growth dropping from over 10% annually to an estimated 4.3% by 2025, closely aligning with the U.S. rate of 3.8%. This downturn is largely attributed to a sharp decline in home prices, which have fallen to levels not seen since 2016, erasing 85% of the gains made from 2012 to 2021.
Macquarie's Larry Hu emphasized that the future of China's housing market is closely tied to its export performance, suggesting that a recovery in domestic consumption is unlikely until exports can no longer drive growth.
The G20 finance ministers' recent meeting has intensified discussions about China's economic policies, with a call for the country to address issues that hinder domestic consumption. Despite a surge in imports and strong export growth, particularly in sectors like data center components and air conditioning units, the overall trade surplus remains substantial.
Analysts, including Zong Liang, noted that while Beijing is implementing policies to stimulate domestic demand, it may take years for these measures to yield results. Cultural attitudes towards saving and spending further complicate the situation, as Chinese consumers prioritize education, healthcare, and travel over entertainment and shopping.
This sluggish retail environment poses challenges for China's role in global trade, where it is a major producer but struggles with domestic consumption