China wants to revive its economy, but its policy choices keep getting in the way. Is Beijing self-sabotaging its own recovery? Benzinga contributor Doug Young of Bamboo Works weighs in:
The country needs to take stronger, more decisive steps, place greater value on its consumers and rein in its frequent crackdowns to jumpstart the economy
China wants to right its economy ship, which has slowed sharply in the last few years after more than two decades of breakneck growth that made it the world’s second-largest economy. The only problem is, the country can’t seem to shake its old tendency to crack down on sectors it sees as challenging the social and economic order.
What’s more, it is only giving limited help to consumers who have the power to perk up the economy with their spending. Again, this looks like inability to shake its past tendency to treat such consumers as a second thought, as the government put all its focus on the very economic development that’s now sputtering.
Underpinning the current economic malaise is a Chinese property market that has been slumping for the last five years, following two decades that saw prices post manyfold meteoric gains. Most home prices are now at least 40% below their peaks, sometimes much more in smaller markets where supply far exceeds demand.
As prices slump, Chinese, who often see real estate as their primary savings vehicle, are seeing their individual wealth dry up in tandem. Property accounted for 52% of household assets at the start of this year, down sharply from 67% in mid-2021 when prices were near their peak, according to data cited in a South China Morning Post report.
China has taken repeated steps to try to perk up the market, most recently rolling out a new nationwide mortgage-interest subsidy for first-time home buyers last month. Yet at the same time, it continues to punish the home developers that are struggling under huge debt incurred during a building spree that left the market vastly oversupplied.
Downfall of a property titan
In the most recent move that won’t bring much confidence back to the market, a court in August sentenced Hui Ka Yuan, founder of Evergrande, poster child for the industry’s excesses, to life in prison for a range of financial crimes. At the same time, it also formally started to liquidate his company in bankruptcy court. While that ended five years of uncertainty about the company, it hardly sent a positive signal to the many other developers out there still trying to work through their debt problems.
The property sector is far from the only one being subjected to the type of government crackdown that used to be relatively common in China but had become less so in recent years.
Another prominent crackdown began earlier this year when the government launched an anti-trust probe against leading online travel agent Trip.com (TCOM.US; 9961.HK) that ultimately resulted in a massive 5.2 billion yuan ($776 million) in fines and other penalties. But the market regulator didn’t stop there, and is now conducting similar investigations against smaller but still sizable online travel agents including Tongcheng (0780.HK), as well as services run by Alibaba (BABA.US; 9988.HK) and Meituan (3690.HK).
In another similar crackdown, the city of Beijing suddenly rolled out a massive no-fly zone for smaller aircraft over the city last month after one such aircraft crashed into the city’s tallest building in June. While such moves may protect China’s cities from similar accidents, they are also almost certain to cast a chill over companies like EHang (EH.US), a maker of tourism-use small aircraft, that Beijing had been fostering to help build the country’s low-altitude economy.
The government is also taking similar steps to tamp down overheated competition that resulted in massive excess capacity in the solar and wind equipment sectors, as well as in new energy vehicles (NEVs). A rapid buildup of those sectors, with strong government support, helped to fuel China’s economic growth in the go-go days. But now such government-led attempts to correct the problem are only exacerbating the current economic slowdown.
What consumers?
Then there’s China’s massive base of 1.4 billion consumers, whose collective spending power could help revive the economy. This group was traditionally overlooked by China, which preferred to rely on exports, foreign investment and infrastructure spending to power its economic miracle.
Now, the government is finally turning its attention to this potential source for jumpstarting the economy. But many of its efforts feel like too little too late, and are often half-hearted. Weak job and property markets aren’t helping either, since uncertainties over home values and job prospects are leading many consumers to cut back on their spending, especially for items seen as non-essential like travel and restaurant dining.
China has publicized a number of programs aimed at pumping up consumer spending. The highest profile of those was a trade-in program that provided government subsidies for people who traded in old items like home appliances and electronics for new ones. But that program, originally launched in 2024 and which the government says supported sales worth 2.61 trillion yuan in 2025, is rapidly losing momentum this year as most people have run out of things to trade in.
Incentives that helped to charge up China’s NEV sales are also being pared back as the government tries to force the industry to stand on its own, even as most companies are still losing money. A program that exempted NEVs from China’s vehicle purchase tax ended at the end of last year, replaced by one that only exempted them from half of the tax this year. That caused purchases to spike at the end of last year, only to slow sharply this year.
As that happened, many individual NEV makers have reported their domestic sales slid into reverse this year. And while many are trying to sell more abroad to keep their sales growing, the resulting huge flood of exports has only raised alarm bells among many of China’s major trading partners.
Many have argued that China needs to take bolder steps to jumpstart its economy compared with the smaller incremental ones it has taken so far. It also needs to shake some of its old habits, such as regular crackdowns on emerging industries, and do more to encourage its 1.4 billion consumers to relax their fondness for saving and spend more on enjoying their country’s newfound prosperity.
Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.
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