As a property slump drags on, China’s economy looks more resilient than it feels

Workers hammer silver jewelry into shape at a shop in Beijing, Thursday, Dec. 18, 2025. (AP Photo/Ng Han Guan)

HONG KONG — By some measures, China’s economy is looking resilient, with strong exports and breakthroughs in artificial intelligence and other advanced technologies.

But that’s not how it feels for many ordinary Chinese, who have been enduring the strain from weak property prices and uncertainty over their jobs and incomes.

While some industries are thriving thanks to government support for technologies such as AI and electric vehicles, owners of small businesses report tough times as their customers cut back on spending.

Some economists believe that the world’s second largest economy is growing more slowly than official figures suggest, even though China may hit its official 2025 annual growth target of about 5%. Beijing has averted a damaging full blown trade war with Washington after President Donald Trump struck a truce with Chinese leader Xi Jinping, but many longer-term challenges remain.

Chinese consumers are feeling the pinch

Business is “very tough” right now as people don’t have much disposable income, said billiards hall owner Xiao Feng, who lives in Beijing.

“It seems the wealthy don’t have the time, and the ordinary folks don’t have money to spend,” said Xiao. “After deducting all costs, including rent, labor, utilities, I’m just breaking even.”

Xiao and his wife, a nurse, have a 10-year-old son. With her stable income, she is now the household’s breadwinner.

“Before, I used to contribute about 100,000 yuan (about US$14,250) annually to the household,” said Xiao, who has cut his staff from eight to five as competition has intensified. “But I’ve had no income for about six consecutive months now.”

Beijing-based commercial property agent Zhang Xiaoze said he used to make up to 3 million yuan (nearly $428,000) a year during the peak years of the mid-2010s. Now he brings in about 100,000 yuan annually, and the the business environment is “extremely challenging,” he said.

“Demand is weak because many companies are relocating out of Beijing,” Zhang said, who is married with one child. “The fundamental issue is that people don’t have money.”

“There are times when I must dip into my savings to support the family,” he said.

Two sides of China’s economy

China’s ruling Communist Party is promoting leader Xi’s push for “high-quality growth” and domestic innovation as it shifts investment and policies toward a consumption-driven growth model and high-tech industries.

During its rapid ascent as an export manufacturing superpower, China invested heavily in infrastructure such as railways, highways and ports, industrial zones and other property development. While boosting consumer spending and business investment are key priorities, exports remain a vital driver of employment and economic growth.

In the first 11 months of this year Chinese exports amounted to a record $3.4 trillion -- with growing shipments to Southeast Asia and Europe helping to offset a sharp drop to the U.S. -- versus imports of $2.3 trillion.

“China’s economy is amidst what I call a ‘Great Transition,’ as it moves away from the growth engines that drove growth the past three decades,” said Lynn Song, chief economist for Greater China at ING.

As is true in the U.S., in China the AI boom has helped drive gains in share prices. But the resources that have poured into the technology sector have not translated into a direct wealth effect for most people, said Song. “It is no surprise that many feel the situation on the ground is not reflecting the relatively more optimistic growth picture,” he said.

The divergence between the official economic growth figures and what many Chinese people are feeling suggests China ’s actual growth “may be well below” what official data suggest, said Zichun Huang, China economist at Capital Economics.

Recent economic data indicate growth is slowing. Retail sales increased by just 1.3% in November from a year earlier, slower than October’s 2.9% growth. Fixed-asset investment, meanwhile, dropped 2.6% in the first 11 months of 2025.

Disposable household income growth has been running below pre-pandemic pace in recent years, economists at HSBC said in a recent report, and “income gains from property have virtually vanished.”

The International Monetary Fund recently raised China’s growth forecast from 4.8% to 5%, near the official target, and banks including Goldman Sachs raised their forecast for China’s economic growth in recent months.

Other estimates vary. Capital Economics forecasts growth at a 3% to 3.5% annual pace this year. The Rhodium Group, a think tank, puts it at 2.5% to 3%.

The property slump is a pain point

Much of China’s consumer and investor confidence hinges on property, the main repository for most household wealth. Housing prices have fallen 20% or more since they peaked in 2021. The massive downturn followed a crackdown on excessive borrowing in the real estate industry that triggered a debt crisis.

In the first 11 months of this year, new home sales fell 11.2% by value from a year earlier, according to China’s National Bureau of Statistics. Property investments fell nearly 16% year-on-year.

Xiao, the Beijing billiards hall owner, bought an apartment in the city’s Tongzhou district in 2019 for more than 3 million yuan. ($428,000). It’s now worth about ($342,000).

“I drive a ten-year-old car and have no plans to replace it given the economic climate,” Xiao said. “If my apartment hadn’t depreciated so significantly, I might have already bought a new one.”

Xiao said he used to spend a “considerable amount” on his son’s tutoring fees. “But now we’ve cut that entirely and teach him ourselves instead,” he added. “I feel quite uncertain about the economic outlook.”

A Tianjin-based tutor, who only gave his surname as Zhou as he’s not authorized by his company to speak to the media, said his income dipped by more than a third as more parents stopped sending their children for tutoring.

“Because of the economic situation, parents are unwilling to spend money on tutoring,” said Zhou. “They prefer large group classes instead of one-on-one tutoring.”

“Business is much worse than before -- about 50 percent worse than during the COVID period,” he added. “The future looks bleak.”

Growth is likely slowing in 2026

Most forecasts are for the economy to grow more slowly in 2026 and beyond, as China’s leaders tinker with incremental policies while putting off fundamental reforms that might help boost consumer confidence. Challenges ahead center on consumption and investment, but with the housing market remaining weak, growth momentum may be slow, economists said.

Excess supply in many industries, including autos, steel and consumer goods is a chronic problem, depressing prices and profits. Chinese export prices have fallen by over 20% overall since early 2022, according to HSBC. Government efforts to tame price wars have so far had “minimal impact,” it said.

The country’s growing trade surplus, at more than $1 trillion in 2025, is also adding to trade friction, potentially triggering protectionist moves that may crimp exports.

Economists such as Michael Pettis of the Carnegie Endowment for International Peace argue that a fundamental shift enabling workers to hold much more of the nation’s wealth is needed. But that so far appears to be politically untenable.

With people cutting back on everything including business trips, a budget hotel owner in the northern city of Shijiazhuang was glum about the outlook.

“I don’t see an immediate rebound in the economy,” said the man, who gave only his surname, Zhai, fearing that making critical comments about the economy could get him in trouble. “(I) don’t have a high level of education, so switching industries is almost impossible. Other industries are also struggling.”

“My lease expires next May or June,” he added. “If the situation hasn’t improved by then, I will shut down the hotel.”

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AP’s Beijing newsroom contributed to this story.

Chan Ho-him, The Associated Press