China Is Trying to Get Its Own People to Spend More. It Is Not Going Well.
China's leaders began 2026 with an unusual resolution. The Politburo, led by President Xi Jinping, declared that domestic demand must become the main driver of growth, replacing the country's traditional reliance on exports. Beijing committed $51 billion in front loaded spending and unveiled a consumer subsidy programme worth $9 billion to kick start household spending.
The problem is structural. Chinese consumers are cautious. House prices in most cities are still falling, and property remains by far the largest source of household wealth. Youth unemployment, while declining from last year's crisis highs, remains elevated. The savings rate is high because people are uncertain about job security, healthcare costs, and retirement. Fiscal stimulus can put money in people's pockets, but it cannot easily make them feel confident enough to spend it.
China's CPI inflation has hovered near zero throughout the past year, in deflationary territory. Private fixed asset investment fell 5.3% year on year over the first eleven months of 2025. The property market is now in its fifth year of downturn since the peak in 2021. New housing starts are down 75% from their peak; property investment is down 50%. Even with government support, the IMF estimates that resolving the property sector's structural problems could require resources equivalent to around 5% of GDP over several years. China is a $20.65 trillion economy with a clear growth plan. The hard part is getting the people living inside it to believe in the plan enough to open their wallets.
Key Figures: • China consumer subsidy programme: $9 billion • China CPI inflation: near zero, with deflationary pressure persisting • New housing starts: down 75% from 2021 peak • Private fixed asset investment (January to November 2025): down 5.3% year on year
