QNB Projects Continued Growth in Chinese Consumer Spending

Qatar National Bank (QNB) has forecasted that private consumption in China is set to continue its upward trajectory, bolstered by a significant accumulation of savings and supportive government policies. In its latest report, QNB emphasized that the Chinese consumer is a more substantial growth driver than many analysts have previously acknowledged.

The report highlighted a noticeable slowdown in consumer spending during the second quarter of 2025, following a robust start to the year. Recent data indicates that real growth has dipped to its lowest point since January, raising questions about the effectiveness of new measures aimed at stimulating consumption. Despite these initiatives, household savings rates have remained stable, revealing the challenges of altering long-standing financial habits.

Consumer Behavior and Economic Challenges

Historically, household consumption has been viewed as a crucial component in enhancing China’s economic framework. This issue extends beyond mere economic cycles. QNB noted that while the Chinese government aims to transition from an investment-driven economy to one focused on services and consumption, persistent weak consumption remains a barrier to sustainable growth, particularly in a nation of 1.4 billion people with rising income levels.

The cautious approach of Chinese consumers can be attributed to multiple economic disruptions, including the COVID-19 pandemic, a prolonged downturn in the property market, and unpredictable policy shifts. Despite this, QNB argues that there is a fundamental misunderstanding of the scale and significance of China’s private consumption.

Although the ratio of consumption to GDP in China does not match that of highly consumption-driven economies like the United States, it is comparable to figures in other advanced economies, particularly those with export-oriented and advanced manufacturing sectors such as Japan, South Korea, Taiwan, and Singapore.

Potential for Growth in Household Consumption

QNB outlined three key factors that underscore the importance of Chinese consumers for the country’s future economic growth. Firstly, data from the People’s Bank of China shows that household deposits in the banking system surged from $11.8 trillion before the pandemic to $22.3 trillion by May 2025. This substantial pool of savings could be mobilized quickly to enhance consumption or investment if consumer confidence improves, thereby increasing consumption’s share of GDP.

Despite this potential, the report notes that achieving a significant uptick in consumer spending remains challenging. Chinese households typically adopt a cautious financial stance, saving more due to limited government social safety nets. Nevertheless, even a slight reduction in the savings rate could dramatically influence both consumption and investment, especially as the government gradually enhances its social welfare programs.

The second factor involves China’s strategic shift in its growth model, moving away from heavy infrastructure investment. Policymakers are prioritizing the strengthening of household demand alongside a focus on advancing manufacturing sectors like electric vehicles, batteries, and semiconductors. Beijing aims to increase the share of consumption in GDP from the current 40% to 50% by 2035, supported by various social policy reforms and housing support initiatives.

Lastly, ongoing structural reforms are gradually altering household risk perceptions. Changes in the property sector, including stricter mortgage regulations and the reduction of developer debt, are addressing market imbalances. Although these adjustments may temporarily slow economic activity, they are expected to stabilize household finances and foster a more robust consumer environment, ultimately reducing the inclination toward excessive precautionary saving.

As these reforms unfold, they are likely to ease constraints on household spending, paving the way for increased consumption growth in China. The interplay of these factors could lead to a more dynamic economic landscape, where consumer behavior plays a pivotal role in shaping the country’s economic future.