China Declares Plans To Focus on Domestic Economy

In response to rising geopolitical trade tensions, Chinese officials have emphasized focusing on internal economic stability and development. Key areas of focus include the real estate market, emerging industries, and expanding domestic consumption.

Despite heightened U.S. and EU tariffs on Chinese goods and electric vehicles, China remains committed to evolving upon their reforms and expanding its economy to the rest of the world market. Challenges persist, particularly in real estate and consumption, prompting calls for stronger macroeconomic policies. The recent Third Plenum policy meeting underscored these priorities and anticipated further detailed resolutions.

Amidst all of the government’s efforts to boost consumer spending, Chinese consumers remain cautious, preferring to save their money, repay their debts, and invest in wealth management products rather than increase their personal consumption and overall retail spending.

In the first half of the year, household deposits grew by 9.27 trillion yuan ($1.3 trillion) but showed a significant slowdown in June. Retail sales increased by only a meager 2% in June, the weakest in 18 months, indicating that lower savings growth hasn’t translated into higher spending.

Analysts attribute this to households deleveraging and shifting deposits to investment products amid falling property prices, job insecurity, and high debt. The economy grew by 4.7% in Q2, yet still far below expectations, prompting calls for more consumer support to address underlying economic challenges.

Furthermore, higher global tariffs on Chinese exports, due to countries protecting their industries, have hindered the positive impact of increased export revenue. The statistical bureau noted industrial upgrades but insufficient domestic demand. Major Chinese company shares have declined in Hong Kong trading.

China has seen an increase in international tourists by easing visa requirements for more European countries, Australia, and New Zealand, leading to higher hotel prices in Shanghai and Beijing. However, this tourism boost has not fully counterbalanced weak domestic spending.