In August, the total retail sales of consumer goods in Beijing decreased by 11.4% compared to the same period last year, marking the 11th consecutive month of decline. The price of pork, an important component of China’s consumer price index, has dropped to an 18-month low, while the sluggish real estate market shows no signs of improvement. Analysts point out that the large-scale equipment upgrading and trade-in policies introduced by the Chinese Communist Party in the second half of last year to stimulate consumption are now losing their momentum, and the overdraft effect is becoming evident.
According to a report by China Business News on Sunday, the Chief Economist of JD Group stated that since July this year, due to reduced subsidies, the impact of overdraft effects, and the rise in base figures, downward pressure on China’s economic consumption has started to become apparent.
The so-called “overdraft effect” refers to the government’s consumption subsidy policy pre-empting future demand, and once the policy ends, the consumption market may slow down.
In the first half of the year, the residents’ consumption propensity (per capita consumption expenditure per capita disposable income) was 65.5%, 2 percentage points lower than the same period in 2019 before the outbreak of the pandemic.
According to recent data from the National Bureau of Statistics of the Chinese Communist Party, service industry retail sales from January to August increased by 5.1% year-on-year, significantly lower than the 6.2% growth rate for the whole year last year. Looking at residents’ service-oriented consumption expenditure, the growth rate has continued to decline from 6.9% in the fourth quarter of last year to 4.4% in the second quarter of this year.
Further indicators confirm the lack of consumer confidence. In July, the National Bureau of Statistics of the Chinese Communist Party’s consumer confidence index was 89.0%, remaining below 90 for 28 consecutive months. The employment index was 72.8%, still hovering at historically low levels.
Additionally, the People’s Bank of China’s survey of urban depositors in the second quarter also showed that the proportion of residents inclined to “spend more” had dropped to 23.3%, the lowest since 2024, while those inclined to “save more” stood at 63.8%, the second highest in history.
Consumption in Beijing plummeted sharply in August. According to the Beijing Municipal Bureau of Statistics, total retail sales of consumer goods in Beijing in August dropped by 11.4% year-on-year, with commodity retail sales down by 12.3% and catering services down by 3.4%. From January to August, total retail sales of consumer goods decreased by 5.1% year-on-year.
Journalists’ inquiries found that the total retail sales of consumer goods in Beijing have been declining for 11 consecutive months since October last year, with a high decline of 9.9% recorded in March.
It must be emphasized that to paint a rosy picture for the Chinese Communist Party, various levels of the Communist Party’s statistical bureaus have consistently exaggerated economic data, and the real consumption data may be even worse. Recent research by Wang Guochen, a research assistant at the Chinese Academy of Economic Research, shows that after beautifying GDP and unemployment data, the Communist Party authorities have started to embellish consumption growth rate data from 2025 onwards, reporting an average overestimation of 1.0 percentage points per month to downplay the tightening of consumption.
In the Chinese Consumer Price Index, pork prices are a significant component, but due to oversupply of meat products and weaker-than-expected demand, pork prices continue to decline.
Bloomberg reported that recently, wholesale pork prices have dropped to the lowest level in 18 months, with pork prices plummeting by 21% over the past year, causing an average loss of 162 yuan per pig for farmers. Analysts from Zhuo Chuang Information stated, “There are too many pigs in the market now.”
The start of the National Day holiday last week is expected to see hundreds of millions of people traveling, shopping, and dining, which typically boosts national economic activity. However, due to wholesalers and retailers not stocking up on pork as extensively as in previous years, the impact on boosting pork consumption demand is limited.
According to Xinhua Finance, as of September 28, the national average price of live pigs has fallen to 12.26 yuan/kg, with some regions even dropping below 12 yuan/kg, reaching a new low for the year. In Harbin, Ma Hongkun’s pig farm is consuming the profits accumulated in previous years at a rate of about 100 yuan per pig in losses.
“Everyone is enduring, seeing who can lose less and survive in the end.” This industry veteran with ten years of farming experience said that to reduce losses, he is considering reducing the weight of the sows in his breeding stock.
The National Day holiday coincides with the Mid-Autumn Festival, a significant gift-giving season in the past. However, Grace Qiu, Administrative Manager of a consulting company in Guangzhou, told the South China Morning Post, “Although Mid-Autumn Festival gifts are one of the most important staff benefits for us, this year’s average budget is only 140 yuan (20 U.S. dollars) per person, a 40% drop from last year.”
“This industry is extremely depressed. We have lost our biggest clients, and since the beginning of this year, we have had to lay off a third of our employees.”
Why has consumption been persistently sluggish? Lian Ping, Chairman of the China Chief Economist Forum, recently stated that the widespread downturn in the important pillar of China’s economy, the real estate industry, shows no signs of improvement, and one should not expect a rapid market rebound.
“The impact of the real estate sector on consumption is significant, affecting more than a dozen industries directly or indirectly related to consumption… The economy is currently going through a difficult period, and real estate is the main reason.”
After Beijing lifted the purchase restriction policy outside the Fifth Ring Road in early August and relaxed housing provident fund regulations, Shanghai and Shenzhen followed suit, issuing similar policies to stimulate housing demand. However, the property market continues its downward trend.
The latest data from the National Bureau of Statistics show that in August, prices of new houses in 70 cities were still declining. Sales prices of new commercial residential buildings in first-tier cities dropped by 0.9%, with Beijing, Guangzhou, and Shenzhen seeing decreases of 3.5%, 4.3%, and 1.7% respectively. Prices in second and third-tier cities decreased by 2.4% and 3.7%.
From January to August, real estate development investment accounted for 18.5% of the national fixed asset investment, down from 23.2% in 2022, 22% in 2023, and 19.5% last year.