China
China’s Consumption Challenge Can’t Be Fixed in Stages
On August 21, 2026, China expanded interest subsidies for consumer borrowing, increasing the yearly cap for credit card instalments to 5000 RMB, aiming to boost consumer confidence and spending.
China’s Expanded Interest Subsidies
On August 21, 2026, China’s Ministry of Finance announced the expansion of interest subsidies for consumer borrowing. New credit card installment plans for purchases such as cars and home renovations will now benefit from a 1 percentage point annual subsidy, with the maximum subsidy per borrower increasing from 3,000 RMB (US$450) to 5,000 RMB (US$750). This initiative aims to stimulate spending amid rising economic concerns.
However, lowering borrowing costs may not effectively boost household confidence, which has been identified as a significant barrier to increased consumer spending. The subsidies extend a short-term plan initiated in September 2025 and complement the State Council’s consumption-driven growth targets set in July 2026. Despite these efforts, China’s national saving rate remains high at 42.7% of GDP, with household consumption languishing below 40% since 2005.
As investment dwindles as a GDP share, surplus savings are increasingly being directed abroad, causing net exports to rise to 2.8% of GDP in 2024. A reliance on foreign markets to absorb excess output proves challenging in a shifting trade landscape. Consequently, strengthening domestic consumption has emerged as a critical priority for China’s economic strategy.
Source : China’s consumption problem won’t be solved in instalments
