Chinese Premier Li Qiang delivered a speech at a State Council meeting, emphasizing the government’s focus on stimulating domestic consumption and maintaining stable living standards. According to Li, this is crucial for sustaining the country’s economic growth, especially as China faces restricted access to some foreign markets due to ongoing trade disputes.
Western countries are tightening barriers on Chinese goods, citing state subsidies and unfair competition, among others. As a result, Beijing is directing efforts toward boosting internal demand, though this brings challenges for the ruling Communist Party and the country’s economic model.
For this year, the government targets about 5% consumption growth despite the complex international environment. Li highlighted that China is calmly, yet actively, responding to external challenges, and noted the 90-day extension of the trade truce with the US—which has prevented additional American tariffs on Chinese goods.
However, domestic challenges remain acute. Chinese factories are seeing declining profits because of weak domestic demand and falling producer prices. Industrial deflation persists, meaning factories are selling products below cost, undermining corporate financial stability. The government is taking steps to stimulate household spending, such as removing consumption barriers and supporting the service sector.
The real estate sector remains in crisis, with falling investments, dropping prices, and increased consumer caution. The state is supporting developers, providing preferential loans, and considering initiatives to restore market confidence and encourage homebuyers.
Unemployment—especially among youth—continues to be a major concern. Li Qiang stressed that the government is working to preserve jobs. Nonetheless, economic results remain mixed: industrial production is slowing, and retail sales growth lags behind forecasts.
While exports provided a short-term boost in July, the effect may be temporary, and long-term recovery requires structural economic reforms. Furthermore, extreme weather in July may impact future economic reports.
Overall, China’s economy is entering a period of transition. Traditional stimulus tools are having limited impact, and major sectors now require reform and innovative approaches.
