China needs smarter, not less, investment to unlock household demand
However, this growing consensus risks simplifying a far more complex question: what exactly is the role of consumption in China's growth, and is its perceived weakness truly the root of the country's economic challenges?
China's supposed failure to unlock household demand is viewed not just as an internal policy misstep – it's the structural flaw underpinning everything from global overcapacity to unfair trade advantage. Critics argue that Beijing's preference for supply-side expansion – more factories, more infrastructure, more exports – has crowded out domestic demand at the expense of foreign producers, justifying
protectionist responses
In more ideological corners, this economic trajectory is portrayed as the result of a development playbook that prioritises national power and industrial dominance over household welfare. The implication is clear: China will never become a 'normal' consumer-driven economy because it lacks the political incentives to do so.
Ironically, even within China, the
post-Covid policy discourse has begun to echo this narrative. Since 2022, 'expanding domestic demand' has re-emerged as a central theme of economic policymaking. That shift has been welcomed by many economists, who view it as overdue recognition that China must transition from an investment-led growth model to a more balanced one.
Moreover, in public perception, building a 'consumption-oriented economy' has begun to sound like the end goal in itself – a necessary badge of economic maturity and a way for China to finally enter the ranks of developed economies.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
South China Morning Post
4 minutes ago
- South China Morning Post
China's childcare subsidy likely to be first of many family-friendly policies
Ten years after China formally abandoned its one-child policy, it has unveiled a national childcare subsidy to encourage couples to have children. This is not only to stem a decline in the population but also to address a worrying trend in its structure that could ultimately pose social and economic problems. Advertisement The government has announced it will provide an annual subsidy of 3,600 yuan (US$501) for every child born on or after January 1 this year until they turn three, regardless of whether they are the first, second or third child. Last year, births in China rose for the first time since 2017, an uptick partly attributed to the auspicious Year of the Dragon in the Chinese zodiac. This year, China's population will slip below 1.4 billion people. While some may argue that, given its natural resources, the country could do with a smaller population, the effect of ageing and shrinking of the workforce on the structural population balance in the future has become a worry for policymakers. It has given rise to concerns about a 'super-aged' society comparable demographically with Japan, where nearly 30 per cent of people are over 65. The key to sustainable population planning now is not to reverse the population trend but to optimise the structure to help maintain economic growth and stability. A related issue is the need for China to boost domestic economic consumption. One of the reasons that Chinese consumers are not spending more – including on having more children – is because of the state of the social welfare system. Many families still have to save their disposable income for elderly and child care and medical expenses. Advertisement More than 20 provinces across China have already experimented with childcare subsidies at various local levels, but this marks the first nationwide scheme introduced by the central government.
South China Morning Post
34 minutes ago
- South China Morning Post
How China used rare earths and the US playbook to turn on the chip tap again
Rare earths are needed for everything from consumer electronics to electric vehicles, wind turbines and fighter jets – and China controls the supply chain. In the third of a four-part series, we look at how Beijing's dominance in the critical minerals is matching up to Washington's lead in artificial intelligence, as well as how they are related. When the US president unveiled his tariffs in April, China knew it had a trump card that had been quietly gaining in value over the decades and that no other country in the world held. Rare earths are essential components in many technologies, from consumer electronics and electric vehicles, through clean energy and aerospace, to medical and defence equipment. They are also used in research and development, including semiconductors. China holds half of the world's reserves of rare earths and most of the global refining capacity. And from 2020 to 2023, 70 per cent of rare earth compounds and metals imported by the United States were from China, according to the US Geological Survey.
South China Morning Post
2 hours ago
- South China Morning Post
China invites descendants of US Flying Tigers who fought Japan to mark end of World War II
China has invited descendants of the American Flying Tigers to Beijing for the commemoration of the end of World War II, according to people familiar with the situation. Advertisement A source said they include Cynthia Chennault, the daughter of Claire Lee Chennault who commanded the volunteers who helped in China's fight against Japan, and one of his granddaughters, Nell Calloway. The Flying Tigers, officially known as the American Volunteer Group, were a group of pilots who were hired to fight for China – then under the rule of the Nationalists – against the Japanese invasion. The Tigers fought the better-equipped Japanese air force over the skies of China and Southeast Asia between late 1941 and the summer of 1942, when they were formally incorporated into the US Air Force to continue the fight. The invitations were extended under the name of the National People's Congress, China's legislature, and the Chinese People's Association for Friendship with Foreign Countries, a semi-official body set up to improve relations with other countries, the source said. Advertisement Jeffrey Greene, chairman of the non-profit Sino-American Aviation Heritage Foundation, said he and his wife Katherine had also been invited to attend the official events in the Chinese capital 'on September 2 and 3 commemorating the Chinese and Allied victory in the Second World War'. China announced in June that it would hold a series of events to commemorate the 80th anniversary of the end of the conflict.
