Qiushi Journal acknowledges the existence of balance sheet recession in the household sector and proposes to "accelerate the restoration of household balance sheets"

In the second paragraph, the author points out, “Total retail sales of consumer goods include both goods and catering income, and primarily reflect changes in the overall scale of goods consumption.” However, the share of services consumption in China has already exceeded 46%. The implication is that analyzing consumption cannot be limited to total retail sales alone. In January-May,“total retail sales of goods and services” grew by 2.8% cumulatively, indicating that“China’s consumption market is currently running stably and the trend of quality improvement and upgrading has not changed.”In short, the overall consumption situation is positive, and the issues are local and secondary.

The author then analyzes the structure of consumption, noting that the slowdown in the growth rate of total retail sales is primarily due to “durable goods consumption coming under considerable pressure,” for two reasons: [1] “the concentrated effect of previous consumption-boosting policies was released,” meaning that policies replacing old products with new ones from 2024H2 to 2025H1 increased the base figure. I've pointed out long ago that such policies not only draw on future consumption but also crowd out other types of consumption (see points 1, 2, 3, 4 below). [2] In May this year, high temperatures and heavy rain in some regions also disrupted offline consumption. On this reason, opinions may differ.

After this analysis, the article states: “Short-term fluctuations in goods consumption data do not represent a trend change in the consumption market, but it is still necessary to pay close attention to deep-seated problems and challenges facing current consumption.” In other words, the overall situation is good, but problems cannot be ignored. The author then begins to fully articulate their views.

The author notes that “recently, some residents have been clearly under pressure in terms of employment and income.” The main reasons are:

[1] “Against the backdrop of economic transformation and upgrading, and the acceleration of new technologies like artificial intelligence, some workers’ expectations for future employment and income have weakened.” In other words, economic transformation and rapid iteration of AI and other new technologies lead to increased structural unemployment and a rise in the natural unemployment rate, resulting in pessimistic expectations among workers. I already noticed these trends back in 2023 and analyzed these issues in Chapter 11 of my book, “Crossing the Natural Interest Rate Trap.”

[2] “High-quality social security and public services are relatively insufficient, increasing households’ precautionary savings motives and dampening their willingness to consume.” In other words, concern about inadequate social security systems causes households to worry about the future, reduce consumption, and increase savings just in case.

On this point, I don’t completely agree, nor do I consider it a major reason. Today's social security system is definitely more robust than it has been in the past decades, yet weak consumption did not exist before.

[3]“In recent years, the property market has undergone a deep adjustment, leading many residents to lament that their family’s wealth has diminished—thus the wealth effect has weakened and households have become more cautious in their spending.” This means that as housing prices fall and assets shrink (while liabilities remain the same), household balance sheets worsen and residents reduce consumption to cope.

Note that this is not the first time an official journal under the Central Committee has mentioned that falling housing prices hurt residents’ balance sheets. Back on January 1, 2026, Qiushi published an article by Zhong Tingjun, Deputy Director of the Policy Research Center under the Ministry of Housing and Urban-Rural Development, entitled "Improving and Stabilizing Property Market Expectations." It stated that “the sharp decline in real estate sales and prices has had a significant impact on the demand side of the real economy, on the asset side of balance sheets, and on the liability side of financial institutions’ balance sheets.” In other words, it recognized the harm to household balance sheets from falling prices, though not yet that damaged balance sheets lead to reduced spending. This time, they have acknowledged this link.

Why do I emphasize this so much? Becausesince May 2023, I have repeatedly called for attention to the issue of balance sheet recession, advising decisive measures to break its transmission chain and contain its momentum. I have argued that boosting consumption requires direct repair of household balance sheets.But as someone with little influence, my posts have repeatedly been deleted, and I have been silenced.The official media also did not acknowledge the existence of a balance sheet recession. Even in 2024, many “economists” and “professors” published articles “proving” it did not exist. I think they are deliberately ignoring reality—they haven’t even grasped some basic theoretical and economic logic, yet go on to make misleading statements. Because of that, I devoted my efforts to writing "Crossing the Natural Interest Rate Trap: The Roots and Solutions to the Balance Sheet Recession, Manufacturing Outflow, and De-globalization," laying out my complete theory to clarify confusion.

Now, Qiushi Web recognizes the transmission chain offalling housing prices → damaged household balance sheets → reduced consumption/increased savings, which essentially is an acknowledgment of a household balance sheet recession. Given this,to boost consumption, one must start by repairing household balance sheets.Something I have been advocating for three years is finally being accepted—this brings tears to my eyes.

[4]From the perspective of supply-demand alignment, some areas of goods and services still remain in a stage of homogenization and low-level competition, making it hard to fully satisfy increasingly personalized and diverse consumer demand.

IV. Providing Policy Recommendations to Boost Consumption

The author then cites the Central Political Bureau meeting held on April 28, 2026, stating“We must thoroughly implement the CPC Central Committee’s decisions, earnestly strengthen our sense of urgency to boost consumption, step up efforts to remedy weaknesses, and bolster weaker links, strengthen households’ consumption capacity and willingness, and promote more rapid growth of goods and services consumption in society.”

Corresponding to the above four reasons, the author suggests boosting consumption through these four points:

[1] Consolidate the foundation for household consumption, accelerate the formulation and implementation of urban and rural income increase plans, expand employment with more active employment policies, increase households’ disposable income through improved distribution systems, and alleviate household worries about consumption through a more comprehensive social security system.

This mentions employment policies, distribution systems, and social security. Distribution system reform is the most difficult. As I point out in my book, during a period of declining natural interest rates, returns to capital also fall, so the labor share of GDP in primary distribution will inevitably decline—this is an economic law. If you aim to raise labor’s share, the capital share would fall, making it harder for firms to survive and possibly leading them to cut investment or shut down, causing more unemployment. Thus, reforming the distribution system during a natural interest rate downturn is extremely difficult and will take a long time.

[2]Accelerate the repair of household balance sheets, focus on stabilizing the real estate market, promote the healthy and stable development of capital markets, prevent the negative spiral of falling asset prices on consumer confidence, and strengthen urban and rural residents’ expectations and confidence in consumption.

As housing and stock prices fall, household balance sheets are impaired; residents sell houses, stocks, and funds at a discount; companies dump plants and equipment, causing asset prices to spiral downward, resulting in deflation. This is typical of a balance sheet recession, as seen in the Great Depression (1929-1932) and post-1990s Japan.

Since the article has recognized the transmission chain of“falling housing prices → damaged household balance sheets → reduced consumption/increased savings”, it naturally follows that: stabilizing house prices and boosting the stock market are necessary to prevent a negative spiral in asset prices and further deterioration of balance sheets.

But “not continuing to worsen balance sheets” alone is not sufficient to boost consumption. To truly boost spending, household balance sheets must be repaired. This is a long-term process and cannot be accomplished overnight; efforts must be sustained and gradual.

This article marks the first time a high-level publication and website like Qiushi has explicitly proposed to “accelerate the repair of household balance sheets”, which is praiseworthy by any measure.

[3] Further strengthen supply-demand alignment, improving quality and optimizing structure on the goods side, and expanding new growth points for consumption in culture & tourism, health care, eldercare, and childcare services, to better meet diversified demand with high-quality supply.

[4] Optimize consumption policies, continuously improve policy systems on fiscal, financial, and industrial support for consumption, eliminate unreasonable and restrictive measures in the consumption field, diversify consumption scenarios, improve consumption experiences, and ensure consumers are able, willing, and want to consume.

On this last point, I want to emphasize that when formulating consumption policies, one must not further damage household balance sheets. In a balance sheet recession, residents are willing to hold large amounts of cash (deposits) because cash provides enormoussecurity. For example, the “trade-in” policy introduced in 2024 essentially sold durable goods at a discount to residents; “cash” on the asset side of their balance sheets became “durable goods.” Superficially, nothing changed, but once received, durable goods begin to depreciate—which means the balance sheet actually deteriorates, net assets fall, and the sense of security declines. Residents will inevitably cut consumption elsewhere to save. In other words, this kind of policy not only draws on future consumption, but also crowds out other types of spending. That is why consumption growth quickly weakened after H2 2025 (see Why Encouragement Alone Can’t Boost Consumption?). In the future, policymakers must be careful not to undermine the household balance sheet.

Boosting consumption is a very broad topic. I have been calling for attention to it for years, analyzing it from many angles, and have argued that the root of the balance sheet recession is that the natural interest rate has dropped too low, and, on this basis, I have proposed a comprehensive theoretical framework for the determination of the natural interest rate in socioeconomic systems. I have also highlighted the issue of “the negative feedback vortex among consumption growth, income growth, and GDP growth” (see link). This Qiushi Web article does not go that deep.

One should not expect a single policy or article to immediately boost consumption, but daring to face the problem is a positive step.Because only by facing up to problems can we accurately analyze, understand, and solve them. If one always plays ostrich and avoids them, the problems will never be resolved.