Challenges in Transitioning Chinese Economy

The Chinese economy is struggling to transition from an export-led, low-end manufacturing model to a consumption-driven one. There is skepticism about whether the leadership is either unable or unwilling to implement necessary changes. Proposed pathways for boosting consumption are well-documented, including fiscal and tax reforms aimed at reallocating wealth from the state and corporate sectors to households. Despite these known strategies being feasible, political resistance hampers their adoption. The household sector faces a three-fold challenge: first, it receives a disproportionately low share of national income in the form of wages and entitlements; second, it is economically exploited as household wealth supports banks and local governments without adequate returns; and third, this exploitative structure sustains the current investment-led growth model. Consequently, without addressing these inequities, a shift towards a consumer-oriented economy remains unattainable.