While Donald Trump prepares to conquer the icy wilderness of Greenland, China is advancing on other fronts. In 2026 as well, Chinese export goods will continue to flood global markets. Europe and Norway will not be spared. At the same time, China’s own consumers will keep counting their pennies. Why? Because something is fundamentally wrong with Chinese society, and these problems will not disappear anytime soon.
The eastern superpower expects growth of between four and five percent this year. That would be a respectable performance, and higher than in any Western economy. Yet the growth will largely be driven by exports, not by domestic consumption. This is precisely what makes the situation so unusual – and politically fraught. “We have reached a turning point. China cannot continue on this path,” says European Commission President Ursula von der Leyen.
There are three main reasons for what is happening.
First, Chinese households are focused on saving, largely because they feel insecure about the future. China’s welfare state is simply too weak. Healthcare, pensions, education, and housing are to a great extent the responsibility of the individual. In a society also marked by demographic ageing and economic uncertainty, saving appears to be rational behavior.
Second, wages are rising too slowly, especially in the private sector. And third, Beijing’s leaders lack strong tools to boost consumption quickly. This is because they are reluctant to stimulate the economy through direct transfers to consumers. Large-scale welfare reforms are also viewed as problematic.
Under such conditions, industry must sell its surplus abroad. Over recent decades, China has developed impressive production ecosystems in electric vehicles, batteries, solar panels, machinery, chemicals, and electronics. But these factories cannot reduce output without significant social and financial costs. When the domestic market fails to absorb the goods, they must be exported.
At the forefront of domestic saving are the country’s millions of pensioners. China now has 310 million people aged 60 and over, or 20 percent of the population. This number is expected to exceed 400 million by 2035, and continue rising thereafter. By 2050, one third of the population will belong to this age group. “The silver wave will hit us hard,” says demographer Yu Fuxian, referring to China’s rapidly greying population. “These are people who are less inclined to buy new clothes, go to the cinema, dine out, or travel.”
Many elderly people also have limited purchasing power because pensions are small. Traditionally, families—especially children—were expected to care for the elderly. But this model is breaking down. Years of growth and structural change have led to more elderly people living alone or far from their children. On top of that, institutional elderly care is largely a private responsibility. As a result, savings become crucial.
This produces a consumption pattern very different from that of countries with strong public welfare systems. In Europe, many elderly people can spend more because healthcare and care services are largely publicly financed. Norway is a prime example.
The annual decline in the working-age population also has a negative effect. This is the group that normally drives economic growth. According to the World Bank, China had about 774 million people of working age last year. By 2050, that number could be roughly 240 million lower. This trend cannot be reversed, even as the party and the government urge young couples to have more children.
Chinese leaders’ reluctance to build permanent social safety nets is not only due to the enormous costs involved, but also to ideological considerations. Since 1949, China’s development strategy has rested on three pillars: production, discipline, and long-term national strength. A society driven by private consumption is more easily associated with individualism and a loss of state control.
The leadership’s fear of the unknown is clearly reflected in its view of free trade unionism. In China, this is prohibited. A trade union exists, but it is subordinate to the party’s political objectives. Workers cannot establish independent unions or form competing organizations. Nor do they enjoy a genuine right to strike, even if strikes are not explicitly banned.
As a result, the role of trade unions is the reverse of the Western model. Instead of representing workers vis-à-vis employers, the Chinese trade union movement primarily serves as a governance tool for the party. This practice also applies in private companies, of which China has an ever-growing number. The result is that wages are kept artificially low, weakening consumption. It should be added, however, that wages have increased substantially in absolute terms over time, particularly between 2000 and 2015.
In any case, the goods China produces must be sold abroad—otherwise the system grinds to a halt. Last year, China’s exports amounted to an astonishing USD 3.58 trillion, up six percent from the previous year. This occurred despite a wide array of countermeasures from the United States, the EU, and others. Most forecasts suggest that exports will increase again this year.
This means that Beijing’s leaders must brace for new controversies with the Trump administration and the European Commission in Brussels. The ongoing disputes at negotiating tables are, of course, a burden for all parties. But from a Chinese perspective, domestic stability matters more than anything else. China’s history—and the party’s own experience—suggests that political power is lost from within, not from without. Jobs and political control are therefore prioritized, even if this creates friction in global trade.
In April, Donald Trump will travel to China on an official visit. Restoring balance in trade with China is a flagship issue for the strongman in the White House. Last year, the U.S. trade deficit stood at around USD 240 billion. Behind the scenes, American negotiators are trying to persuade the Chinese to make trade concessions, but as before, they will encounter stiff resistance. The same applies to the EU. The Commission in Brussels is particularly concerned about competition from China’s automotive industry.
China’s great advantage is its apparent absence of urgency. In a country where leaders often quote ancient philosophers, time is not an enemy but an ally. As the military theorist Sunzi wrote 2,500 years ago: “If you know the enemy and know yourself, victory will not be in doubt.”
