The Chinese government has promised new childcare subsidies, increased wages and better paid leave as part of its latest push to revive a slowing economy. That's on top of a $41bn discount programme that covers a wide range of things, from dishwashers and home decor to electric vehicles and smartwatches. It's a spending spree that will encourage Chinese people to crack open their wallets.
Simply put, they are not spending enough. Monday brought some positive news. Official data said retail sales grew 4% in the first two months of 2025, a good sign for consumption recovery.
But, with a few exceptions like Shanghai aside, new and existing home prices continued to decline compared to last year. While the US and other major powers have struggled with post-Covid inflation, China is experiencing the opposite: deflation - when the rate of inflation falls below zero, meaning that prices decrease. In China, they fell for 18 months in a row in the past two years.
Prices dropping might sound like good news for consumers. But a persistent decline in consumption - a measure of what households buy - signals deeper economic trouble. When people stop spending, businesses make less money, hiring slows, wages stagnate and economic momentum grinds to a halt.
That is a cycle China wants to avoid, given it's already battling sluggish growth in the wake of a prolonged crisis in the property market, steep government debt and unemployment. The cause of low consumption is straightforward: Chinese con.