One of the main problems with China’s economic growth in recent years has been the weakening of domestic consumption. For a long time, rapid income growth and a booming real estate market supported Chinese household spending. Now, the mechanism is working in the opposite direction.
Falling house prices, slowing income growth and uncertainty about the economic future are pushing people to save more and spend less. The IMF also says that China’s long-term property crisis and weak consumer confidence are squeezing domestic demand. The size of China’s economy makes this problem not just a domestic issue.
China is the world’s second-largest economy and a major source of global industrial, energy and raw material demand. Therefore, Chinese households’ spending less in stores, restaurants, the car market and the service sector could also affect sales in other countries. The scale of the problem is illustrated by current figures for China’s economy.
Although the country's economy grew by 5% in 2025, the IMF notes in its report that private domestic demand remains weak and that overall inflation in 2025 is expected to average 0%. In the second quarter of 2026, China's economic growth weakened to 4.3%. In July, retail sales growth was only 0.6%.
Industrial production increased by 4.5% over the same period. An important contradiction arises here. Chinese factories continue to produce, but the domestic market does not accept all of these products at the same pace.
As a result, companies are increasingly turning to foreign markets. In August 2026, China's exports increased by 25% in annual terms. Exports of high-tech products increased by 42.9%.
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