China's consumer sector is facing significant headwinds, with urban disposable income growth slowing to 4.3% in 2025, down from around 10% annually before 2020, and only marginally above the U.S. rate of 3.8% [1]. This deceleration is attributed in large part to a sharp decline in home prices, which have fallen back to 2016 levels, erasing 85% of the gains made between 2012 and 2021—a drop far steeper than the 47% decline seen during the U.S. housing bust [1]. According to Macquarie's Larry Hu, the outlook for China's housing market is closely tied to exports, and a bottom may only be reached when policymakers can no longer rely on export-driven growth [1].
At the recent Group of 20 finance ministers' meeting in the U.S., China's economic policies and trade surplus came under intense scrutiny. The G20 joint statement included a call for China to 'remove distortions that constrain domestic consumption,' a paragraph Beijing objected to, making it the only dissenting member and drawing criticism from U.S. Treasury Secretary Scott Bessent [1].
Despite global tariffs, China's exports have remained robust, with June seeing the sharpest growth since 2021 and July beating estimates. This strength is partly due to surging exports of air conditioning units to Europe—up more than 40% to a record high—driven by a European heat wave, and increased global demand for China-made parts used in data centers [1]. Imports also surged in June at their fastest pace in five years, but this has not significantly narrowed China's trade surplus [1].
Zong Liang, former chief researcher at the Bank of China, stated that China did not anticipate the current export boom at the start of the year. He noted that while Beijing has announced several policies to boost domestic demand, it may take up to five years to see meaningful results, and increasing household income remains a significant challenge [1].
CONCLUSION
China's slowing consumer growth and persistent trade surplus have drawn international criticism and heightened scrutiny at the G20. While exports remain strong, domestic demand recovery is expected to be slow, suggesting continued global focus on China's economic policies and their broader impact.