James' World 2

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Even if Communist Party leaders wanted to unleash more spending, formidable obstacles stand in the way, including a work force increasingly trapped in insecure, low-wage employment, a rapidly aging and shrinking population and a weak social safety net that encourages people to save for emergencies.

China’s people, perhaps more than at any time in the last few decades, are in no mood to go out and splurge. Many have been airing growing anxiety online about falling incomes and scarce jobs. The average income was just over $500 a month in 2025. Unemployment is high.

A fundamental shift that has taken place in China’s labor market is the root cause of these problems.

Since the early 2010s, intensifying global economic competition, automation, the pandemic-era closure of countless businesses, slowing economic growth, and China’s protracted property slump have all combined to eliminate millions of manufacturing and construction jobs. This has driven countless workers into a growing service sector that requires fewer skills and offers lower pay.

An estimated 200 million people, or at least one-quarter of China’s work force, are now engaged in insecure “gig” employment — delivering meals or packages, driving ride-hailing cars, selling goods online, or doing other short-term work. According to a study last year, nearly half of gig workers have little to no social safety net — health care, pension, unemployment, housing, or maternity benefits — a problem worsened by chronic government underinvestment in social services. Advances in technology have given companies a precise view of seasonal demand and simplified recruiting, enabling them to hire and fire workers as needed.

Adding to worker insecurity is China’s household registration system, which restricts access to social services like schooling and health care outside one’s hometown. This effectively ensures that people from China’s vast countryside serve as cheap migrant labor for megacities like Beijing, Shanghai, and Shenzhen. Reform of the registration system has been discussed for decades, but eliminating it would shift enormous welfare costs onto those cities, which currently reap benefits from migrant labor without shouldering social costs.

These are hardly the foundations of a vibrant consumer economy, and the future looks no better.

The real estate crash, now five years old, has left homeowners paying mortgages on apartments they can’t sell. New families are a key driver of spending on homes, appliances, and cars. But China’s people are marrying less frequently and having fewer babies: The population fell for the fourth straight year in 2025, and the fewest babies were born since the founding of the People’s Republic of China in 1949. Fewer people, of course, means fewer consumers.

The deeper question may be whether the Chinese Communist Party’s pledges to give consumers more of a role in the economy are real — or an empty pledge to placate critics.

Consumer spending in China has hovered at 40 percent or less of China’s GDP for years (compared to more than 65 percent in the United States). The government has introduced policies in recent years to encourage spending, but these typically take the form of rebates and subsidies for appliances, electronics, and cars. This boosts sales for manufacturers and retailers but doesn’t really improve the lot of the average consumer.

Increasing the role of consumer spending in China’s economy would mean surrendering some state control to the people, something the Communist Party is loathe to do.

While the United States and Europe typically stimulate spending by putting money in consumers’ hands through tax cuts, direct payments to individuals and families, or social safety nets that reduce the need to save for emergencies, China’s government manages the economy primarily through the country’s companies. It directs investment capital to them, grants them subsidies, and uses other means to get the business sector to execute the party’s industrial policies.

Truly meaningful steps to increase the economic role of Chinese consumers would in effect redistribute income to households, leaving less capital for the party to direct toward strategic priorities like developing the tech industry, which Beijing sees as essential to securing the country’s technological self-sufficiency and competing with the United States.

The success of China’s export machine offers little incentive for the Communist Party to change course and gamble on a new consumer-focused strategy. Trade surpluses may create tension with trading partners, but they earn Beijing massive amounts of hard currency and generate endless headlines about Chinese export dominance in electric vehicles, solar panels, batteries, ships, and many other products. All of this projects an image of Chinese economic strength to audiences at home and overseas.

China’s government says the new five-year plan will lead to a marked increase in consumer spending. The more likely outcome is business as usual: more low-priced Chinese goods on world markets, more pressure on emerging economies struggling to spur their own development, even fewer Chinese imports of foreign products — and more tension with the rest of the world.

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Kevin Frayer/Getty Images

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Click the link below for the complete article:

https://www.nytimes.com

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