The news: China is taking more decisive steps to encourage domestic consumption and rein in price wars that are fueling deflation and straining trade relations.

• Beijing said it would allocate an additional RMB 69 billion ($9.6 billion) to its consumer goods trade-in program starting in October, bringing the total funds issued this year to RMB 300 billion ($41.87 billion).
• At the same time, the government plans to “address disorderly competition among enterprises” and more closely scrutinize overcapacity in key industries, according to a Politburo statement.

Consumers remain cautious: Despite government efforts to boost domestic spending and reduce reliance on manufacturing, the share of GDP from consumption is shrinking—an indication that consumers remain extremely cautious amid uncertainty both at home and abroad.

• Consumption accounted for 52% of economic growth in the first half of 2025, a considerable deceleration from 61.4% during the same period last year, per the National Bureau of Statistics.
• The reluctance to spend is understandable: Consumers face stagnating wages, an uncertain job market, and an ongoing property slump—driving households to focus on necessities and prioritize saving.