On economic issues, the Beijing government’s first important signal is: consumption!
At the Two Sessions, the government finally mentioned consumption. The question is, how to boost it?
For years, economists both domestically and internationally have consistently argued that the crux of China's economic downturn lies in sluggish consumption, yet the Xi administration has long ignored these claims. However, the economic downturn has intensified, and Beijing has finally given up. At this year's Two Sessions, Beijing pledged to "swiftly address the problem of weak domestic demand, particularly household consumption." Li Qiang mentioned consumption 31 times in his government work report. It's not like they haven't tried. In fact, several months ago, the Chinese government announced interest rate cuts, relaxed home purchase restrictions, and raised the local government debt ceiling. However, none of these measures have worked, and it seems they have run out of options.
The National Bureau of Statistics announced on March 9 that in February 2025, the national consumer price index fell by 0.7% year-on-year and 0.2% month-on-month.
On average from January to February, the national consumer price index fell by 0.1% compared with the same period last year.
This suggests that consumption remains sluggish. Although prices for major commodities like houses and cars have fallen in China, ordinary people simply refuse to buy them. However, at the same time, a phenomenon known as "stagflation" has also emerged. Unlike the price reductions seen for cars and houses, household expenses for essential needs are actually increasing, a phenomenon known as " stagflation ." This phenomenon is related to consumers downgrading their consumption to cheaper goods, which naturally drives up prices due to increased market demand. Furthermore, local governments, in an effort to increase tax revenue, are imposing various fines and public service fees, which in turn increase manufacturing and transportation costs. These costs are then passed on to consumers, leaving many people caught in a double bind.
On March 5, at the National People's Congress, China's top leadership once again pledged to "vigorously boost consumption," but provided few specific details and did not indicate how much financial support would be provided.
