Beijing’s Consumption Plunges; Expert: Systemic Reform Needed

From January to June 2025, the profit of Beijing’s accommodation industry fell by 92%. (Video screenshot)

[People News]  According to data released by the Chinese Communist Party (CCP) authorities, consumer spending in China’s first-tier cities is more severe than the national average. In August, while the national average grew 3.4% year over year, Beijing’s total retail sales of consumer goods suffered a cliff-like drop, falling 11.4% year over year, and down 5.1% from January to August, according to the Beijing Municipal Bureau of Statistics.

According to a report by the Beijing Youth Daily, the Beijing Municipal Bureau of Statistics explained that the decline was due to Beijing’s strong “headquarters economy” characteristics. In recent years, some enterprises have changed their business models, and the number of cross-regional business entities has increased significantly, which has impacted the retail sales realized in Beijing. Among them, the retail sales of communication equipment and cultural office supplies fell by 26.2% and 11.9% respectively; due to weak demand in the fuel vehicle market, automobile retail sales dropped by 19.4%, and related petroleum products also declined. As for the accommodation industry, among 1,613 enterprises, the total profit from January to June this year was 59.8 million yuan, averaging just over 40,000 yuan per enterprise — a 92% drop.

Today, Yicai published an article by Shen Jianguang, Chief Economist of Jingdong Group, discussing seven major structural divergences in China’s consumer market — one of which is that “the consumption growth rate of first-tier cities is lower than that of other city tiers,” a trend that began in 2024 and continues this year.

He stated that the weakness in consumption in first-tier cities is affected by multiple factors, such as the more significant negative wealth effect of falling housing prices, greater impact from layoffs and salary cuts, and decreases in the resident population in some cities. It is difficult to determine which factor is the most important, but the urgency of stimulating consumption in first-tier cities is becoming increasingly evident.

According to the blogger “Tom’s Financial Perspective,” these problems are not unique to Beijing — they exist nationwide. Consumption is weak, domestic demand is insufficient, and the economy continues to deflate. The reason is simple: ordinary people have no money. Why don’t they have money? Fundamentally, it is due to monopolies causing distributional imbalances, making it nearly impossible for most businesses and individuals to earn money. Only systemic reform — reform of the distribution system, resolving soft budget constraints, improving social security, and so on — can address this. This is also what Professor Xu Chenggang has repeatedly emphasized: China has huge institutional problems, and only through systemic reform can the country escape its economic development woes and completely emerge from deflation.

Systemic reform — doesn’t that mean taking the CCP’s life? △