Why Chinese families are still holding back on spending despite record exports
Even as China's exports surged this year, weak household spending and investment dragged the country's economic growth to its slowest pace in more than three years.
Chinese households are still holding back on major purchases, and it’s weighing on the world’s second-largest economy even as its export engine keeps running hot. A prolonged downturn in the property market, combined with lingering uncertainty over wages and employment, has kept consumer spending and investment weak through the first half of the year.
Official data released on Wednesday showed the economy expanded at an annualised 4.3% in the April-June quarter, down from 5% in the January-March quarter and below forecasts — the slowest pace of growth in more than three years. The slowdown came despite exports continuing to rise: customs data showed outbound shipments up 17.6% in the first half of the year compared with a year earlier, and up 27% in June alone.
Much of that export strength was driven by the artificial intelligence boom and strong overseas demand for Chinese electric vehicles, computer chips and other electronic products, backed by significant government support as advanced technology remains a policy priority. China has also largely avoided the broader economic fallout from the Iran war, even as higher energy prices added to inflationary pressures around the world.
But that export strength has not been enough to offset weak demand at home. Economists say the economy is becoming increasingly uneven, with government support and private capital flowing into advanced sectors such as artificial intelligence, robotics and semiconductor manufacturing, while lower-value manufacturing and service industries that employ far larger numbers of people continue to lag.
Mao Shengyong, deputy head of China’s National Bureau of Statistics, said the gap between supply and demand continues to pose a challenge. ‘Given the increasingly unstable and uncertain global situation, the imbalance between strong supply and weak demand remains acute,’ he told reporters, adding that China would keep pursuing ‘higher-quality economic growth’ through high-tech manufacturing while also focusing on building a stronger domestic market and supporting stable employment.
Chinese leaders have set a growth target of between 4.5% and 5% for 2026, lower than last year’s 5%. The International Monetary Fund recently lifted its forecast for China’s 2026 growth by 0.2 percentage points to 4.6%, while projecting growth will ease further to 4.1% in 2027. Wei Li, head of multi-asset investments at BNP Paribas Securities (China), said the economy is undergoing a ‘significant transition.’
Image credit: Wikimedia Commons/by Ermell
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