Consumer Confidence Expected to Remain Weak: Consumer confidence is expected to remain subdued for at least another two to three years, weighed down by two major factors. First, the severe youth unemployment problem; second, the prolonged pressure on the real estate market—Chinese households own an average of 1.5 homes each, and against the backdrop of the one-child policy, newly married couples have limited demand for housing, making the housing glut difficult to resolve in the short term. Moreover, housing in China serves not only as shelter but also as a "rainy-day fund"—a substitute for the underdeveloped social safety net. Falling home prices erode household wealth, further dampening consumer confidence.
Outlook for Capital Markets and the Economy: The central bank is now focusing on capital markets, attempting to translate improved market sentiment into actual demand. As a core asset heavily held and closely watched by banks and insurance companies, the price of China's 10-year government bond has been on a persistent downtrend. Although stimulus measures may temporarily push interest rates higher, this downtrend is expected to continue. Based on current consumption-side performance, China is likely to face deflationary pressure in the coming years.
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