China’s stimulus keeps missing the mark: Manishi Raychaudhuri
SPY•China’s GDP grew 4.5% year over year in the third quarter, but weak household consumption and job creation continue to weigh on domestic demand. Government debt, including off-balance-sheet financing vehicles, rose from 80% of GDP in 2019 to 127% in 2025.
1. Two-track economy
China’s economy has split between surging high-tech exports and weak domestic consumption and job creation, Manishi Raychaudhuri writes. Third-quarter GDP growth reached 4.5% year over year, supported by exports tied to global AI spending and clean-energy investment, while a prolonged housing slump continued to weigh on households.
2. Policy priorities
Since 2020, bank loans to property have flattened as lending shifted toward advanced manufacturing and green technology, where loans grew annually by 10-15% and 20-40%, respectively. The article argues that investment in capital-intensive industries has not resolved unemployment, while falling home prices have eroded household wealth and job insecurity has encouraged precautionary savings.
3. Limited stimulus options
New measures announced last month focused on capital injections into state-owned banks and insurers and consumer credit subsidies, following a broader package in September 2024. Government debt rose from 80% of GDP in 2019 to 127% in 2025, and proposals to strengthen social safety nets and raise household consumption targets have received a lukewarm response. The article says trade barriers and overcapacity increase the pressure to revive domestic demand.
