As a property slump drags on, China’s economy looks more resilient than it feels

China’s Economy Shows Mixed Signals as Consumers Feel the Pinch

China’s economy presents a study in contrasts, with robust exports and technological advancements masking the financial struggles faced by ordinary citizens. While official statistics suggest resilience, many Chinese consumers are grappling with declining property values, employment uncertainty, and diminished spending power.

The world’s second-largest economy may achieve its official annual growth target of about 5% for 2025, but economists believe actual growth could be significantly lower. Beijing has recently avoided escalation of trade tensions with Washington after President Donald Trump and Chinese leader Xi Jinping reached a truce, though fundamental economic challenges persist.

For small business owners like Beijing-based billiards hall owner Xiao Feng, economic conditions have become increasingly difficult. “It seems the wealthy don’t have the time, and the ordinary folks don’t have money to spend,” said Xiao. After covering rent, labor, and utilities, his business is barely breaking even. His wife, a nurse with stable income, has become the family’s primary breadwinner.

Similarly, Beijing commercial property agent Zhang Xiaoze has seen his annual income plummet from up to 3 million yuan ($428,000) during the mid-2010s boom to just 100,000 yuan ($14,250) now. “Demand is weak because many companies are relocating out of Beijing,” Zhang explained. “The fundamental issue is that people don’t have money.”

This economic dichotomy reflects China’s complex transition as the Communist Party shifts focus toward Xi’s “high-quality growth” model. The government is redirecting investments from traditional infrastructure and property development toward domestic innovation, consumption-driven growth, and high-tech industries, particularly artificial intelligence and electric vehicles.

China’s export sector continues to show remarkable strength, reaching a record $3.4 trillion in the first 11 months of 2025, with increased shipments to Southeast Asia and Europe offsetting decreased trade with the United States. However, these macroeconomic successes have not translated into improved living standards for most citizens.

“China’s economy is amidst what I call a ‘Great Transition,’ as it moves away from the growth engines that drove growth the past three decades,” said Lynn Song, chief economist for Greater China at ING. While the AI boom has boosted share prices, Song noted that investment in the technology sector has not created a direct wealth effect for average citizens.

Recent economic indicators suggest slowing growth. November’s retail sales increased just 1.3% year-over-year, down from October’s 2.9%, while fixed-asset investment dropped 2.6% in the first 11 months of 2025. Household income growth remains below pre-pandemic levels, and “income gains from property have virtually vanished,” according to HSBC economists.

Growth projections vary widely. The International Monetary Fund recently raised China’s forecast from 4.8% to 5%, aligning with the official target. However, Capital Economics estimates growth at 3-3.5%, while the Rhodium Group places it even lower at 2.5-3%.

The property sector remains a critical weak point in China’s economy. Housing prices have fallen 20% or more since their 2021 peak following a government crackdown on excessive borrowing that triggered a debt crisis throughout the real estate industry. In the first 11 months of 2025, new home sales fell 11.2% by value year-over-year, while property investments declined nearly 16%.

This housing slump has directly impacted consumer confidence. Xiao purchased a Beijing apartment in 2019 for over 3 million yuan ($428,000) that is now worth only about 2.4 million yuan ($342,000). “If my apartment hadn’t depreciated so significantly, I might have already bought a new one,” he said. The family has eliminated tutoring expenses for their 10-year-old son, choosing to teach him themselves instead.

The education sector has also suffered. A Tianjin-based tutor surnamed Zhou reported his income has dropped by more than a third as parents cut back on educational expenses. “Business is much worse than before—about 50 percent worse than during the COVID period,” Zhou said. “The future looks bleak.”

Most economists forecast slower growth for China in 2026 and beyond. The government’s incremental policy adjustments have postponed fundamental reforms that might boost consumer confidence. Industrial overcapacity remains problematic in sectors including automobiles, steel, and consumer goods, depressing prices and profits. Chinese export prices have fallen over 20% since early 2022, according to HSBC.

China’s growing trade surplus, exceeding $1 trillion in 2025, risks intensifying international trade frictions and potential protectionist responses that could restrict exports. Some economists, including Michael Pettis of the Carnegie Endowment for International Peace, argue that China needs a fundamental redistribution of wealth toward workers, though such reforms appear politically challenging.

For small business owners like Zhai, who runs a budget hotel in Shijiazhuang, the outlook remains grim. “I don’t see an immediate rebound in the economy,” he said, adding that he may close his hotel when his lease expires next year if conditions don’t improve.