Plants grew by 25.6 per cent and retail by only 0.6 per cent: the fertilizer sample exposed the economic faults of China “to create prosperity and to be cautious”

The most luminous and contradictory example of Chinese industrial policy is now being made by the chum. In the first half of 2026, the urban economy, which is known for its new energy vehicles, semiconductors and panels, grew by 6.8 per cent over the same period, industrial output over and above by 25.6 per cent and exports by 51.9 per cent; However, the retail value of social consumer goods increased by only 0.6 per cent over the same period. On the one hand, production lines are operating at high speed, industrial parks are expanding, and on the other hand, downtown businesses are groping about the decline in their passenger flow and purchasing power. When factory data are becoming more and more beautiful, and ordinary people's wallets remain cautious, the success of the so-called “composable model” cannot be measured solely in terms of value of production and return on investment.

Reuters reported on 10 September that there was a significant gap of about 25 percentage points between the co-fertilizer manufacturing industry and the rate of increase in consumption, which was well above the national average. Enterprises such as Ullai, the East of Kyoto, and Long-term Storage have grown rapidly, with long-term capital inputs and industry support from local governments, and compost has jumped from traditional inland cities to high-technology manufacturing centres. Over the past decade or so, this model of government pre-empting strategic industries and attracting leading firms with state capital has been seen by a growing number of local governments as a replicable “industrial upgrading formula”.

One city, two economic temperatures

The compost industrial and commercial zones are telling two completely different stories. In the suburbs, new energy vehicles and chip enterprises are expanding; In the centre of the city, jewellery shops, restaurants and ordinary retailers face a lack of consumer will. High growth in manufacturing has not been smoothly transmitted to income, job security and consumer growth, suggesting that the most profound structural problem in the Chinese economy today is not “insufficiency of productive capacity” but that production capacity has expanded much faster than households are willing to consume.

If a city can quickly build more cars, chips and panels without making it more expensive, it solves the supply problem without addressing the demand problem.

The advantages of the co-fertilizer model are clear: Governments can pool capital, land, credit and policy resources to support strategic enterprises when private capital is afraid to bet. Since 2008, co-fertilizers have been entering the display, new energy automobiles and semiconductor industries through State investment and recruitment. The long-term storage of the IPO in Asia this year has led to a significant increase in the value of local related national holdings; The Zimbabwe government has been working on a new project to create a huge manufacturing base for co-fertilizers. This model demonstrates the impressive mobilization capacity of the CCP system in “focusing on building industries”.

But the problem is also happening in the same place. The fact that national and local governments are directing more financial resources towards advanced manufacturing means that there are relatively limited resources for consumption, social security and services. Competition can also rapidly turn into expansion of capacity, price wars and decline in profits when new energy vehicles, chips, photovoltaics and robots are being put on the same side of the country ' s various provinces and cities.

The hardest to replicate is not investment, but the winner

Local governments prefer the fertilizer model because it looks like a set of industrial policies that can be replicated: finding a track, setting up a fund, introducing a business, providing land and financing, and then waiting for the business to grow. The real problem, however, is that it is not possible for every city to become a new energy car centre or for every local fund to be held in a parental storage.

This replicatation impulse may entail at least four risks:

• Duplicate construction: local governments pursue the same industry at the same time, resulting in oversupply and bad price competition;

-Financial risk: the benefits of success cases are amplified, while the debt and sunk costs of failed projects are borne by local finance;

• There is insufficient income transfer: capital-intensive industries can create high-yielding jobs without necessarily creating enough middle-income jobs;

- Increased export dependence: Domestic consumers cannot absorb more productive capacity to enter international markets, ultimately fuelling trade friction.

The recent introduction of “inner-roll competition” in Beijing has itself demonstrated the side effects of rapid expansion of high-end manufacturing. (b) The high price reductions in new energy vehicles, photovoltaics and other industries, and the crushing of business profits; When local governments see industrial growth as performance, market opening becomes even more difficult. Policies can order capital into an industry, but not consumers to buy indefinitely.

Manufacturing is strong, not equal to a strong household sector

China, which had relied on real estate to generate investment and family wealth, was now re-engineered for a long time. Beijing hoped to replace the old growth engine with high-tech construction. This transition is necessary, leaving a critical gap: real estate can affect household balance sheets through house prices, while the proceeds of advanced manufacturing can first enter businesses, capital and local industry funds, not necessarily directly into the general household.

This is why the macro-digits of compost and the street experience may be both real and real. An engineer may have received high wages in new industries, but more catering, retail, service and industry workers still face low consumption. If economic growth is increasingly concentrated in a few capital-intensive sectors, GDP can continue to rise, while the “touch economy” of society is likely to continue to cool down.

For China, this imbalance can also be exported. In August, China ' s exports increased significantly, and automobiles and high-tech products became important engines. The more domestic demand is inadequate, the more enterprises are dependent on the capacity of the overseas market to digest; The stronger the exports, the easier the US, Europe and other trading partners see China ' s industrial policy as an impact on their industries. Thus, a problem that was originally a domestic income distribution issue eventually evolved into tariffs, countervailing and global trade disputes.

Focus China believes that compost is worth studying, but should not be deified. It shows the efficiency of China ' s national capital as a driver of industrial upgrading, while also revealing the boundaries of this development model: Governments can support a world-class factory without building consumer confidence through administrative investment; Production lines can be accelerated, but households cannot automatically increase consumption when employment, old age, medical care and housing pressures do not improve.

The real decision to transform China’s economy in the next phase is not whether it can replicate more “fat” than it is to expand the benefits of industrial growth to the household sector. If the income of the population and social security are not improved in tandem, the more successful the manufacturing industry is, the more important the supply-demand imbalance may be. The 6.8 per cent increase in fertilizer combined with the 0.6 per cent increase in retail sales is the most complete picture of the Chinese economy: machines are accelerating, while consumers are still on brakes.