China's reliance on export-led growth has intensified over the past two decades, with domestic consumption failing to pick up the slack, according to a new analysis by economist Stephen S. Roach published in Malaysia's The Star. The findings suggest that efforts to shift the world's second-largest economy toward consumer-driven growth have been, in Roach's own assessment, an 'absolute failure'.

A Warning Unheeded for Nearly Two Decades

In March 2007, then-Premier Wen Jiabao flagged the structural vulnerability at a press conference following the conclusion of the National People's Congress. The Chinese economy, he cautioned, was becoming 'increasingly unstable, unbalanced, uncoordinated and unsustainable' — a formulation that became known as the 'four UNs'. Nearly two decades on, the diagnosis appears more accurate than ever.

Consumption Data Tells a Troubling Story

The numbers underlying Roach's argument are stark. China's retail sales fell 0.6 per cent year-on-year in May 2026 — an unexpected contraction following an already anaemic 0.2 per cent increase in April, marking the first monthly decline in three-and-a-half years. Household consumption as a share of gross domestic product (GDP) stood at just 39.9 per cent in the latest available reading (2024), virtually unchanged from the 39.8 per cent recorded in 2005 — the very baseline Wen had in hand when he issued his warning.

Given persistent consumption weakness through 2025 and into early 2026, Roach's analysis suggests the current share may have slipped even below that 2005 benchmark.

The Global Fallout: Cheap Exports and Job Losses

The failure to rebalance has direct consequences beyond China's borders. With domestic demand unable to absorb industrial output, Beijing has continued to push exports at competitive — critics argue artificially suppressed — prices. This dynamic, the analysis notes, is harming industries and displacing jobs in importing countries, fuelling trade tensions across Asia, Europe, and North America. This is not a new pattern: China faced similar accusations of export dumping during the post-2008 stimulus era, when excess capacity in steel and aluminium flooded global markets.

Why Rebalancing Has Remained Elusive

Structural barriers to Chinese consumption are well-documented. A weak social safety net — covering healthcare, education, and retirement — compels households to save rather than spend. Property sector distress, which has deepened since 2021, has further eroded household wealth and confidence. Without addressing these fundamentals, incremental stimulus measures have repeatedly failed to shift the consumption needle in any meaningful way.

Roach's analysis raises 'critical questions for China and the rest of the world' about the sustainability of an economic model that leans ever more heavily on external demand. With global trade under pressure from protectionist headwinds and tariff escalation, the margin for error is narrowing.