A record 26% of listed Chinese firms are expected to report a net loss for 2025, driven by a prolonged real estate downturn and weak consumer spending, according to a recent survey. The data highlights growing economic challenges in China, where private consumption has remained below 40% of GDP for years, significantly lower than the 50-70% seen in G7 nations.

Real Estate Crisis Drives Economic Strain

The real estate sector, a cornerstone of China’s economy, has been in decline for several years. According to the survey, this downturn has had a ripple effect, reducing consumer confidence and spending. This has made it increasingly difficult for businesses across various sectors to maintain profitability.

Experts point to the collapse of major real estate developers like Evergrande and Country Garden as key moments that accelerated the crisis. These defaults led to a freeze in construction projects and a slowdown in related industries, including materials and services.

According to the survey, the real estate sector’s troubles have not only affected construction but also reduced demand for consumer goods, further compounding the economic strain on firms across China.

Consumer Spending Remains a Persistent Challenge

Private consumption in China has remained below 40% of GDP, despite government efforts to stimulate demand. In contrast, G7 nations typically see private consumption account for 50-70% of their GDP, highlighting a significant gap in economic structure.

Government policies aimed at boosting consumer spending have had limited success. Measures such as tax cuts and increased public spending have not translated into strong private sector growth, according to economists.

China’s economic model, which has long relied on investment and exports, is now facing a reckoning as global demand for Chinese goods has slowed. This shift has forced firms to adapt or risk falling behind.

Competition and Deflationary Fears

Excessive competition in key sectors, such as the electric vehicle (EV) industry, has raised concerns about deflation. With over 100 EV manufacturers operating in China, the market is highly saturated, leading to price wars that erode profit margins.

Eurasia Group analysts predict that deflationary pressures will intensify in 2026, with broader economic consequences. “We should all hold our breath,†The Wire China said, highlighting the potential for a deepening spiral of economic challenges.

The deflationary concerns are not limited to the EV sector. Other industries, including technology and manufacturing, are also grappling with declining demand and rising costs, further complicating the outlook for Chinese firms.

According to the survey, the risks of a prolonged economic slowdown are growing, with implications not only for China but also for global markets. The country’s role as a major trading partner and manufacturing hub means that its economic health has direct effects on international trade and investment flows.

Analysts warn that without a clear strategy to address these challenges, the situation could worsen in the coming years. The government is under increasing pressure to implement more effective measures to boost domestic demand and stabilize the economy.