China’s Domestic Consumption is Stalling

China’s push to get consumers to open their wallets more and refocus the economy on domestic consumption is stalling, contributing to lower growth in the second quarter and forecasts of even slower momentum ahead.

A slew of data released on Monday showed that disposable income growth for urban households slowed to 6.5% in the first half compared with a year ago, down from 9.7% growth in the first half of 2012 and below the growth rate of the economy as a whole. That contributed to a slide in the share of consumption in China’s growth—the reverse of the government’s plans.

Salary increases are “getting slower and slower,” said Peter Zhou, a 29-year-old manager at an information-technology company, who saw his income eke out a meager 3.7% increase to 28,000 yuan a month ($4,500) in 2013. “We used to buy consumer electronics and jewelry every month,” he said, but now he hasn’t made a big-ticket purchase for three months.


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