Qatar National Bank (QNB) has forecasted that the private consumption in China will continue to rise, underpinned by substantial savings, pro-consumption policies, and ongoing reforms aimed at mitigating economic uncertainty.
In its latest report regarding consumption growth, QNB emphasized that China’s private consumption is a more significant growth driver than analysts have previously acknowledged.
Despite a slowdown in consumer spending during the second quarter of 2025, following a strong start to the year, QNB believes that consumption will remain a pivotal factor in the country’s economic trajectory.
In recent months, real consumption growth dropped to its lowest point since the beginning of the year, with experts attributing this slowdown to ongoing structural shifts within the economy. However, the report suggests that household savings rates have remained stable, signaling the difficulty in altering ingrained financial behaviors.
Household savings and consumption growth dynamics
For years, household consumption has been a missing link in China’s economic growth, often seen as a barrier to sustainable, long-term development. Despite the Chinese government’s shift from investment-led growth to more consumption-driven economic models, persistent weak consumer spending has been identified as a key obstacle, especially in a country with 1.4 billion people and high income levels.
The cautious behavior exhibited by consumers is a result of multiple economic disruptions, ranging from the pandemic to the ongoing correction in the property market. Nevertheless, QNB challenges the prevailing narrative that China’s consumption model is inherently weak.
While the ratio of consumption to GDP in China is lower than in high-consumption economies like the United States, it is similar to advanced manufacturing economies such as Japan, South Korea, Taiwan, and Singapore. Moreover, Chinese consumers have outpaced those in other emerging markets, such as Brazil, Russia, India, and South Africa, with significant growth dynamics over the last decade.
Large Pool of Household Savings as a Catalyst for consumption growth
The QNB report highlights three main factors that could bolster consumption growth in the coming years.
The first factor for consumption growth is the sheer volume of household savings in China. According to the People’s Bank of China, household deposits in the banking system have nearly doubled, rising from $11.8 trillion before the pandemic to $22.3 trillion by May 2025. This enormous pool of savings could be mobilized to boost consumption or investment if confidence in the future improves, further driving GDP growth.
While Chinese households traditionally save more and adopt a cautious financial approach due to limited social safety nets, QNB believes that even a slight reduction in the savings rate could significantly impact consumption growth and investment. Government efforts to expand the social welfare system, particularly in consumer finance, will also play a key role in driving future consumption growth.
The second factor discussed in the report for consumption growth is China’s ongoing efforts to transition its growth model. The government is actively working to reduce its reliance on heavy infrastructure investment by promoting advanced manufacturing industries like electric vehicles, batteries, and semiconductors. At the same time, policymakers are focused on increasing the share of consumption in GDP, with a target of raising it from the current 40 percent to 50 percent by 2035.
To achieve this, China has introduced various reforms, including social policy adjustments, housing support initiatives, and credit facilities for households. These measures are intended to provide long-term stability, fostering domestic demand and reducing the dependence on temporary stimulus programs.
The third factor highlighted by QNB for consumption growth is the gradual shift in household perceptions of risk, fueled by structural reforms in the property sector. Tightened mortgage rules and efforts to reduce developer debt are slowly addressing market imbalances and strengthening the financial resilience of households. Although these reforms have temporarily slowed property market activity, they are expected to promote more stable consumption in the long term, easing the excessive caution that has historically restrained household spending.
By addressing systemic risks and improving confidence in the economic outlook, these reforms are poised to gradually diminish the precautionary saving habits that have traditionally governed Chinese households. As a result, QNB predicts that the next phase of China’s growth will be increasingly driven by consumption, further solidifying the role of the Chinese consumer in global economic dynamics.
QNB’s report underscores that although China’s path toward a more consumption-oriented economy will be gradual, the country’s massive savings, proactive policy reforms, and shift in growth priorities offer a promising foundation for sustainable consumption growth. While challenges remain, the increasing role of private consumption in China’s GDP will play a crucial role in driving the country’s economic future.
