Consumers in China have good reason to be cautious.
For years, their disposable income grew at more than twice the rate of consumers in the U.S. Wind data going back to 2003 shows that until 2020, people living in Chinese cities could expect around 10% or faster growth in disposable income every year, far above the 3% average in the U.S.
But that's slowed drastically in the last several years to 4.3% in 2025, barely better than the U.S. at 3.8%.
Why the drop?
A big factor, Macquarie's Larry Hu pointed out in a report Friday, is the sharp decline in home prices. Since their peak in 2021, property values have tumbled back to levels last seen in 2016, erasing 85% of the gains made during 2012 to 2021, Hu said.
That's far sharper than the 47% home price drop during the U.S. housing bust, he said.
"History suggests that the outlook for China's housing market depends much on exports," Hu said, noting that "China's housing market will bottom when policymakers can no longer rely on exports to drive growth."
And that's where the domestic challenges are attracting greater global scrutiny.
Group of 20 finance ministers' meeting in the U.S. this month has now intensified the debate over whether China's exports and economic policies have cost people in other countries their jobs.
The joint statement contained a thinly veiled call for China to "remove distortions that constrain domestic consumption." Beijing objected to that paragraph and three others. It was the only dissenting G20 member, drawing criticism from U.S. Treasury Secretary Scott Bessent.
China's imports surged in June at their fastest pace in five years. But that hasn't been enough to meaningfully narrow its trade surplus, amid growing global demand for China-made parts used in data centers. A heat wave in Europe has also driven up air conditioning unit exports to the block by more than 40% to a record high, according to state media.
That has helped China's exports staying strong, despite U.S. and EU tariffs, clocking their sharpest growth since 2021 in June, and beating estimates in July.
China didn't purposely try to boost its exports, said Zong Liang, former chief researcher at the Bank of China. "Speaking from the heart, China at the beginning of this year did not anticipate this situation," he said in Mandarin, translated by CNBC.
While Zong noted Beijing has announced several policies for boosting domestic demand, he cautioned it might take the full five years to see results, and the challenge of increasing household income could be more difficult.
Differences in the exchange rate and population mean the average person in the U.S. has at least 10 times more in their pocket than someone in China, on an absolute basis ($66,871 vs $6,463), Wind data showed.
One option, relatively new for Beijing's state-dominated economy, is encouraging more investment in the domestic stock market flush with new tech names.
"We hope capital market can develop better," Zong said, "And give consumers relatively high investment return and wealth effects."
But it will take time for retail investors to get over their negative experiences with the stock market, such as the major crash in 2015 that saw the CSI 300 plunge more than 40% in one summer.
There's also a cultural mentality around saving and consumption that contrasts with many parts of the U.S. and Europe.
When consumers in China do spend, education consistently ranks first, according to a People's Bank of China survey completed in 2025.
Healthcare and travel come second and third, respectively. That pushes entertainment and shopping even lower on the list. So it's less of a surprise that retail sales, especially for goods, have been so sluggish.
But in a world where over 75% of global trade constitutes goods, China's outsized role in making them — but not buying — is drawing new scrutiny.
