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China’s consumer spending push faces major challenge – debt-averse households
Beijing has renewed its focus on boosting domestic demand in recent months, but households are cutting debt at fastest pace in years
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Frank Chenin Shanghai
Chinese households have accelerated deleveraging – cutting debt relative to gross domestic product – at the fastest pace in years, a shift that could weigh on the consumer spending that Beijing needs to sustain growth in the world’s second-largest economy.
The household debt-to-GDP ratio fell by 2 percentage points, from 61.4 per cent in 2024 to 59.4 per cent at the end of 2025, according to data released on Monday by the National Institution for Finance and Development (NIFD), a Beijing-based think tank.
Household sector debt expanded by just 0.5 per cent year on year in 2025, marking a historic low. The size of the debt dropped by 0.1 per cent in the third quarter and by 0.8 per cent in the fourth quarter – the first quarterly declines since 1995.
After soft retail sales and weak consumer confidence weighed on the economy last year, Beijing faces mounting pressure to boost domestic demand amid a protracted property slump, high youth unemployment, trade war uncertainties and a rapidly ageing population. Yet while household deleveraging can strengthen financial stability, it can also restrain consumer spending.
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