INVESTMENT WEAKENS, CONSUMPTION REMAINS SOFT
Domestically, wages have not kept pace with the overall economy, even declining in some sectors.
Industrial overcapacity, US tariffs and price wars among producers have fuelled layoffs in factories, while weak demand and faster AI adoption have slowed white-collar job creation.
The property downturn has eroded household wealth and curbed employment in construction since 2021.
The data showed property investment contracting 18 per cent year-on-year in the first six months, while home prices also eased.
Tens of millions of people have fallen out of formal employment into the gig economy, now working for ride-hailing and delivery platforms for long hours, low pay and inadequate social security benefits.
Investment is also slowing.
Local governments, which have been a key driver of investment in manufacturing and infrastructure and are often blamed for creating excess production capacity and misallocating resources in the process, are now under pressure to cut costs.
Emma Cheng, a 28-year-old nurse in Guilin – a major city in Guangxi, one of the fiscally weaker provinces in China – says her income “has fallen off a cliff” as the local medical sector is underfunded.
“In the past I would get gym memberships, beauty salon cards, Tencent Video subscriptions and replace my phone or iPad,” Cheng said.
“I don’t dare spend on such things now.”
China’s fixed-asset investment shrank 5.7 per cent year-on-year in January to June, with even state-sector investment dropping 2.3 per cent.
“The primary drag on the headline growth figure stems from a deepening downturn in domestic investment activity,” said Andy Ji, an analyst at ITC Markets.
“Overall, a high-tech-driven industrial engine running alongside cratering domestic consumption and investment firmly highlights the economy’s deeply uneven growth momentum.”
