China's dependence on export-led growth rises as efforts to rebalance economy fail
New Delhi, July 1
Nearly two decades after former premier Wen Jiabao lamented that the Chinese economy was excessively dependent on export-led growth, the problem has become even worse, according to a new report.
China's efforts to rebalance its economy have been an absolute failure, states the article by economist Stephen S. Roach in Malaysia's The Star news website.
"The lack of meaningful consumer-led rebalancing implies increased reliance on these time-worn sources of economic activity, raising critical questions for China and the rest of the world," the author observes.
The article highlights that in March 2007, Wen had highlighted this very problem at a press conference after the conclusion of the National People's Congress. "While seemingly strong on the surface, the economy was becoming increasingly unstable, unbalanced, uncoordinated and unsustainable," the article cites Wen as saying at that time.
The article cites statistics to show that the situation on domestic consumption in China has taken a turn for the worse.
China's retail sales fell 0.6 per cent year-on-year in May 2026, an unexpected drop following an anaemic 0.2 per cent increase in April and the first monthly decline in three-and-a-half years.
Meanwhile, the latest reading of household consumption as a share of gross domestic product (GDP) is just 39.9 per cent, virtually identical to the 2005 level (39.8 per cent), which Wen had in hand when lamenting the "four UNs" in early 2007.
Given that the latest reading is from 2024 and that Chinese consumption showed continued weakness in 2025 and early 2026, there is good reason to believe that the economy's current proportion of consumption has fallen below Wen's 2005 benchmark, the article added.
This is the main reason for China continuing to dump exports at cheap prices in other countries where it is harming industries and resulting in a loss of jobs.
— IANS
Reader Comments
Interesting analysis from Stephen Roach. But let's be honest, India isn't exactly a shining example either - our own consumption patterns are also weak. We spend too much on gold and real estate instead of everyday goods. China's problem is a warning for us too. Time to focus on our middle class purchasing power.
This is why we need to strengthen our manufacturing sector rather than just importing cheap Chinese goods. The article rightly points out that China's cheap exports are harming industries globally. India should focus on quality and self-reliance, not just price competition. Jai Hind! 🇮🇳
As someone who follows global economics, this is concerning. China's failure to rebalance means continued pressure on global supply chains. But I also think India needs to be more ambitious in expanding its own export base. We can't just complain about China - we need to compete better.
The Chinese government has been trying to push consumption for years but their social safety net is weak - people prefer to save rather than spend. Similar issue in India actually. Without strong healthcare and education systems, no amount of policy will boost domestic consumption. Just my two cents.
This is a wake-up call for all emerging economies. China's model of export-led growth has peaked. India should take note - we need to build a strong domestic market, not just rely on exports to the US and Europe. The article makes a valid point about unsustainable economic structures. 🤔
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.