China’s Beleaguered Households

Commentary

Beijing wants Chinese households to spend more freely, but middle-class Chinese families cannot and will not comply.

They are, in fact, struggling. Incomes have failed to keep pace with the cost of living, especially for families with children. The country’s long-running property crisis has depressed real estate values and, in turn, cut deeply into household net worth.

The experiences during and after the COVID-19 pandemic, along with the subsequent slowdown in China’s economic growth, have created a sense of job and income insecurity. People think more in terms of cutbacks and saving rather than spending.

The property crisis that began in 2021 with the failure of the major developer Evergrande has contributed significantly to this sorry situation. Many who had glimpsed a new prosperity when the construction market was still booming suddenly discovered that the homes they had borrowed to buy would never be completed, or at least not for a long time. They had the burden of a mortgage but were still renting. Such people are hardly inclined to spend lavishly.

For a still greater majority of Chinese households who already owned property, the crisis created an average 23 percent drop in residential real estate values since 2021 and a comparable hit to the family’s net worth. Even for those who have weathered this terrible storm, the events have instilled a desire to spend as little as possible and to rebuild their finances.

On top of this loss of wealth, these households have faced additional burdens. One is the sense of insecurity. During the boom years before the pandemic, the prospect of rising wages and job opportunities encouraged an expansive attitude toward family formation and spending. That began to change with the adverse effects on incomes and employment caused by the pandemic shutdowns and quarantines and by Beijing’s zero-COVID measures that followed.

Adding to this unsettling sense is the slowdown in China’s economic growth over the past few years. In contrast to the boom years, heads of households in their 30s and 40s today frequently complain about pay cuts and periods of unemployment. Hard evidence of this otherwise vague sense emerges from the fact that what Chinese officials call “flexible employment” (read: gig economy and part-time work) now supports some 40 percent of urban workers.

Adding to all this pressure is the rising relative cost of childrearing. China’s collectivist, communist system surprisingly does little to help with the costs of children. Take, for example, the cost of school. China offers free public schools, but because the system imposes an entry exam even for high school, families feel compelled to hire tutors for their children.

More broadly, the China Fertility Cost Report for 2026 estimates that the overall cost of child-rearing amounts to some 30 percent of per-capita gross domestic product (GDP) per year, half again as much as in the United States, for example, or in Japan.

In an effort to relieve some of this burden and thereby increase consumer spending, the Ministry of Finance recently announced a 10.6 percent increase in government funds available to support child-rearing, including coverage of all childbirth costs. In light of its past, this is a big step for Beijing.

But the entire effort amounts to about 110 billion yuan, and since China’s overall GDP is about 135 trillion yuan, the program will reduce the relative cost of child-rearing by less than 1 percentage point, hardly enough to change a household’s attitudes toward spending.

The impact of these burdens shows starkly in the aggregate consumption figures tracked by the authorities in Beijing. Retail sales expanded at only a 5 percent average annual rate between 2021 and 2025, a far cry from the almost 10 percent rate of expansion in the four years prior to the pandemic. This year, retail sales have grown by barely 1.0 percent.

More evidence of this spending reluctance shows in borrowing. Instead of taking on loans, Chinese households are paying down debt. The People’s Bank of China reports that household loans during the first half of this year fell by some 366.8 billion yuan ($54.2 billion), a drop of 1.54 trillion yuan over the 12 months to June 2026.

Instead of spending from income or borrowing to spend, the Chinese are saving. At last measure, they are putting aside some 36 percent of their disposable income a year, far more than households in other countries and at a higher rate than during China’s boom years.

Both Beijing and the International Monetary Fund have made it clear that China’s economic sustainability depends on rejuvenating the Chinese consumer as an engine of growth. The authorities have tried for years to get this result. Unsurprisingly, given the burdens on Chinese households, they have failed, and it looks as though it will take much longer to achieve the result they want, if it ever comes to pass.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.