Nation builds up resilience to push growth

China's ongoing effort to pivot on growth driven by domestic demand is strengthening its economic resilience and supporting global economic stability, while creating fresh opportunities for international businesses, said economists and executives.

Their comments come amid a renewed debate over China's growth model, with critics arguing that excessive reliance on exports and constraints on domestic demand, especially consumption, could leave the Chinese economy vulnerable to external shocks, with potential repercussions for the global economy.

Economists noted that such arguments overlook China's proactive measures to rebalance its economy, underestimate Chinese consumers' purchasing power and overstate the nation's exposure to global geoeconomic uncertainties, as its vast domestic market provides a buffer against external shocks and a stable foundation for growth.

David Blair, US economist and author of the book How Nations Succeed: The China Case Study, said contrary to certain perception that China has done little to boost consumption, the country's success in raising real wages of its people has tremendously strengthened household purchasing power.

According to Blair's calculations, China's median real wage — adjusted for inflation to reflect real income growth — has roughly increased ninefold since 2000, while that of the United States has seen no increase since 1979.

The significant income growth has underpinned a substantial level of domestic consumption in China, which is easily underestimated due to exchange rate factors and differences in consumption behavior between China and the West, he said.

Statistics from the National Bureau of Statistics show that China's domestic consumption and investment accounted for more than 80 percent of its 4.7 percent GDP growth in the first half of 2026, indicating that domestic demand continued to be the main driver of growth.

Luo Zhiheng, chief economist at Yuekai Securities, said that China's large domestic market serves as a strong buffer against external shocks.

China's resilient economic growth, backed by a vast domestic market, still outpaces that of many other major economies and continues to uphold the nation's status as a key stabilizer of the global economy, Luo added.

Looking ahead, analysts said there remains considerable room for China to further strengthen the role of domestic consumption in powering growth, with untapped potential for spending on services, and in rural areas and western China.

With the right policies, this potential could translate into more resilient and sustainable economic growth, rather than a source of vulnerability, they said.

Xiong Yi, chief economist for China at Deutsche Bank, said the Chinese government has been taking proactive steps to ramp up consumer spending in the services sector.

"A key measure is cash handouts to families raising children, which began last year. This is a long-term policy, and the benefits could potentially be increased in the future," he said.

"With these supportive government policies both on the supply side and demand side, we see services spending becoming a longer-term driver for consumer spending; not just for this year, but for the next five to 10 years," Xiong added.

Policy efforts to unlock consumption potential are continuing. Starting on Sunday, China will broaden access to housing provident fund savings, allowing withdrawals for home renovations and property management fees and easing conditions for rental payments — a move analysts said will help spur housing-related spending.

The Ministry of Finance extended interest subsidies to all categories of new credit card installment transactions starting on Aug 1, lowering financing costs to support household spending.

Zhang Lupeng, a senior official at the National Development and Reform Commission, said China has distributed 187.5 billion yuan ($28 billion) of its 250 billion yuan allocation for consumer goods trade-ins this year and will expedite plans for extending consumer goods trade-in policies into 2027.

Foreign businesses are enjoying the perks. Iris Cui, vice-president of Asia procurement and operations at Apple, said the company has benefited from trade-in incentives covering smartphones, tablets and smartwatches, as domestic and foreign brands are treated equally.

Dave Ernsberger, president of S&P Global Energy, said, "China has the potential to generate tremendous demand and innovation, creating broad benefits, as its domestic market expands rapidly."

Economists, nevertheless, emphasized the need to further scale up pro-consumption measures, flagging the slowdown of consumer spending this year amid prolonged property market weakness.

Data from the NBS shows that in the first eight months, retail sales grew 1.1 percent year-on-year, compared with 4.6 percent for the same period in 2025. In August alone, the growth in retail sales slowed to 0.4 percent.

Luo, from Yuekai Securities, attributed the headwinds facing consumption growth to property sector adjustments and the transition of growth drivers.

The property downturn has weighed on purchases of home appliances, furniture and renovation services, he said, noting that falling home values have constrained households' willingness and ability to spend while debt burdens remain. Emerging industries are more technology- and capital-intensive, rather than labor-intensive, and thus provide less direct support for employment, he added.

Raising household incomes should be the top priority to boost consumption, said Luo, who proposed channeling more State-owned capital gains into social security funds, encouraging listed companies to pay higher dividends and establishing a special guiding fund offering incentives for companies to raise workers' wages.

Luo also underlined the need for stronger macroeconomic policy support, including interest rate cuts and expanded government bond issuance, during the rest of the year.

A meeting of the Political Bureau of the Communist Party of China Central Committee in July announced that pragmatic and effective incremental policies will be introduced in a timely manner, and it urged intensified efforts to step up countercyclical adjustments, expand domestic demand and optimize supply.

US economist Blair said that raising the real wages of median workers would be indispensable for maintaining China's growth miracle in the coming decades.

"The only legitimate way to increase people's spending (power) is by increasing their wages," he said, adding that other ways, such as creating asset bubbles and relying excessively on entitlements, would be deleterious in the long run.

Liu Zhihua and Jiang Xueqing contributed to this story.

Contact the writers at zhoulanxv@chinadaily.com.cn