China’s long-running consumer spending weakness is no longer just a domestic issue. As the world’s largest exporter of goods faces a demand shortfall at home, international policymakers are starting to push back, according to the latest edition of CNBC’s The China Connection newsletter.
For years, Chinese consumers enjoyed income growth that outpaced their American counterparts more than two-fold. Wind data going back to 2003 shows urban Chinese disposable income grew around 10% annually until 2020, versus a 3% average in the U.S. But that pace has since slowed dramatically, reaching just 4.3% in 2025—barely better than the U.S.’s 3.8%.
The main culprit, according to Macquarie’s Larry Hu in a Friday report, is the sharp decline in home prices. Property values have fallen back to levels last seen in 2016, erasing 85% of the gains from 2012 to 2021. That’s a far more severe correction than the 47% drop during the U.S. housing bust, Hu noted.
“History suggests that the outlook for China’s housing market depends much on exports,” Hu wrote, adding that “China’s housing market will bottom when policymakers can no longer rely on exports to drive growth.”
That dependency on exports has now drawn global scrutiny. At this month’s Group of 20 finance ministers’ meeting in the U.S., a joint statement included a thinly veiled call for China to “remove distortions that constrain domestic consumption.” Beijing objected to that paragraph and three others, making it the only dissenting G20 member. U.S. Treasury Secretary Scott Bessent criticized China’s stance, according to CNBC.
China’s imports did surge in June at their fastest pace in five years, but that hasn’t meaningfully narrowed its trade surplus. Global demand for Chinese-made parts for data centers and a heat wave in Europe—which drove air conditioning exports to the region up more than 40% to a record high, per state media—have kept exports strong despite U.S. and EU tariffs, with the sharpest growth since 2021 in June and beating estimates in July.
Zong Liang, former chief researcher at the Bank of China, insisted Beijing did not intentionally boost exports. “Speaking from the heart, China at the beginning of this year did not anticipate this situation,” he said in Mandarin, translated by CNBC.
While Zong acknowledged Beijing has announced several policies to boost domestic demand, he cautioned it could take the full five years to see results, and the challenge of increasing household income might be even more difficult.
Income gap, saving culture, and a young stock market
The income gap between the U.S. and China remains vast on an absolute basis. Wind data shows the average American has at least 10 times more in their pocket than the average Chinese person—$66,871 versus $6,463, adjusted for exchange rates and population.
One emerging option for Beijing is encouraging more investment in the domestic stock market, which is now flush with new tech listings. “We hope capital market can develop better,” Zong said, “and give consumers relatively high investment return and wealth effects.” But he acknowledged that retail investors still carry negative memories from the 2015 crash, when the CSI 300 plunged more than 40% in a single summer.
Cultural attitudes toward saving also play a role. A People’s Bank of China survey completed in 2025 found that education ranks first in consumer spending priorities, followed by healthcare and travel. Entertainment and shopping rank lower, which explains sluggish retail goods sales.
With more than 75% of global trade consisting of goods, China’s outsized role in producing them—but not buying them—is now under an international spotlight. Whether the G20 pressure changes policy remains to be seen, but as Zong suggests, any meaningful shift in consumer behavior will likely take time.
Source: www.cnbc.com — https://www.cnbc.com/2026/09/07/cnbc-china-connection-weak-consumption-trade-deficit-g20.html
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