Goldman Sachs’ alternative indicator shows that wage growth in China has slowed to its lowest level since the end of the COVID-19 pandemic. This suggests that domestic consumption growth in China faces greater challenges against the backdrop of escalating risks in overseas trade.
According to data released by Andrew Tilton, an economist at Goldman Sachs, wage growth in China in the second quarter increased by 3.9% year-on-year, marking the lowest level since the pandemic. Economists point out that this indicator is about 1 percentage point lower than official statistics since the beginning of 2025 when Beijing lifted extreme pandemic control policies, economic growth has been decreasing.
Goldman’s tracking system for Chinese wages indicates that sluggish wage growth could pose obstacles to consumption growth in the latter half of 2025. Despite a rebound in retail sales in recent months through subsidies for consumer goods such as smartphones, home appliances, and automobiles, weak labor market conditions and slowing wage growth remain key obstacles to consumption recovery.
Moreover, fierce price wars induced by industry giants in sectors like electric vehicles and express delivery, as well as any potential consolidation or production reduction activities, could lead to further job cuts. Official data from the Chinese Communist Party on average annual salaries in private enterprises showed a year-on-year growth of 1.7% in 2024, further confirming the trend of wage pressure and slowing growth.
As Bloomberg points out, evaluating the labor market conditions in China has become more challenging due to the deliberate manipulation of official employment data by the Chinese Communist Party and the diminishing independent data sources. Data that measures consumer confidence is also becoming increasingly difficult to obtain. To address the issue of insufficient data, Goldman recently revised its wage indicators by incorporating employment sub-indices from various purchasing managers’ indices and China’s unemployment insurance payouts (applicable to those claiming unemployment benefits).
These indicators replaced previously used wage data, no longer published by China’s largest online recruitment platform, and delayed results from the People’s Bank of China’s household income and sentiment surveys. Apart from Goldman Sachs, other economists also use purchasing managers’ indices to evaluate employment conditions. In recent years, these indicators have shown discrepancies with the officially released unemployment rate. The trend in purchasing managers’ indices indicates continued economic stagnation in China, while the Chinese Communist Party’s officially reported unemployment rate has remained stable.
According to a report earlier this month by Longzhou Think Tank, weak wage data and other economic indicators suggest that as formal job opportunities remain scarce, an increasing number of Chinese citizens are forced to engage in self-employment or flexible work, commonly known as gig work. The report suggests that before the labor market truly tightens, it is unlikely that household confidence in China will rebound.