Beijing has identified weak domestic demand as a strategic, long-term problem, shifting its official language to reflect this concern. However, concrete policies to stimulate household consumption are absent, with the government's focus and capital allocation remaining on supply-side industrial investment.
China's state-supported industrial policy has created immense overcapacity and unhealthy domestic price wars, a phenomenon described as 'involution'. With internal demand insufficient to absorb this output, China is effectively exporting this hyper-competition, driving down global prices in key sectors.
Despite a six-fold surge in bank loans to the industrial sector since 2019, this manufacturing and high-tech boom has failed to create net new jobs for over 13 years. All employment growth is concentrated in the highly regulated service sector, where innovation spillovers from the hardware sector are actively blocked by policy.
The property market has fundamentally shifted from a primary growth driver to a long-term structural drag on the economy. Xi Jinping's declaration that 'housing is for living, not for speculation' signals there will be no return to the old model, and policy now focuses on managing the decline rather than engineering a rebound.
Analysts see a high probability of policy continuity, with leadership appearing content with the current trajectory and lacking the urgency for a major pro-growth pivot. The prevailing view is that Beijing will only significantly alter its course in response to a much sharper-than-expected downturn or an external shock.
Keep pulling the thread on Xi Jinping.