Diverging Trends: The West’s Crisis vs. China’s Situation
The cost-of-living crisis has not been uniform around the world. A striking comparison is between the Western economies (U.S., U.K., EU) and China, the world’s second-largest economy. While Americans and Europeans have been grappling with high inflation and stagnating real incomes, China has faced almost the opposite problem: excessively low inflation (even deflation) and concerns about insufficient consumer demand. This divergence provides some insight into different economic dynamics and policy responses.
From 2021 to 2023, as we detailed, U.S./U.K./EU inflation soared to 5–10%. In contrast, China’s official inflation remained very subdued: only 0.9% in 2021, 1.9% in 2022, and a mere 0.2% in 2023 on average. By mid-2023, China even experienced slight deflation (consumer prices dipping below year-ago levels). So Chinese consumers did not face anything like the price shock seen in the West. Prices for many goods in China were flat or falling. For example, food price inflation in China turned negative in 2023 due partly to oversupply (like a cycle of pork prices dropping). Indeed, one anecdote from a chief economist: “People visiting China lately feel prices in their pockets are flat or falling,” due to things like a pork glut lowering food costs.
Why this difference? A key reason is that China’s economic trajectory post-COVID was very different. China maintained strict zero-COVID policies well into 2022, which dampened domestic consumption and kept demand relatively weak. There was no giant stimulus into households like the U.S. did; Chinese stimulus focused more on infrastructure and supporting businesses, not mailing checks to consumers. As a result, there wasn’t an overheating of consumer demand. In fact, Chinese households increased savings during the pandemic, partly out of caution (and lack of spending opportunities in lockdowns). By 2023, as China reopened, one might have expected a surge in spending – but it was underwhelming. Consumer confidence was lukewarm due to high youth unemployment, a housing market slump (which made people feel less wealthy), and residual uncertainty. Thus, China’s issue became too low inflation – essentially, a risk of deflationary spiral if people keep saving and prices keep falling.
Meanwhile, the U.S. and others had the opposite: elevated inflation expectations and people spending down savings accumulated during COVID (in the U.S., the saving rate dropped and excess savings were drawn down by 2023). The WEF’s Chief Economists’ Outlook in September 2025 highlighted this contrast, noting “elevated inflation risks” in the U.S. versus “deflationary challenges” in China. They called it “opposite extremes” in cost-of-living trends.
Wage trends also diverged. Chinese wages have been rising robustly for decades as the country develops – real wages in urban areas have consistently grown, improving living standards from a low base. Even during COVID, while wage growth slowed, China still saw increases. In 2023–2024, while Western real wages were recovering from a drop, Chinese wages continued to climb (ECA International reported a +4.1% real salary increase for China in 2025, far outpacing the U.K.’s 0.4% and U.S.’s ~0.8%). Of course, China’s absolute wage levels are much lower – GDP per capita (PPP) in China is roughly 1/3 of U.S. levels. But the gap has been narrowing as Chinese wages grow faster.
At the same time, China’s cost of living in many respects is lower. Consumer price levels in China are estimated to be around 60–70% lower than in Western Europe or the U.S. by some comparisons. For example, services and housing (outside of the big Tier-1 cities) are relatively cheap. However, in megacities like Beijing, Shanghai, Shenzhen, housing can be extremely expensive relative to local incomes – comparable to New York or London prices, despite incomes being much lower, which indicates an affordability issue. In fact, housing is one area where China has its own kind of cost-of-living problem: home prices rose astronomically in the 2000s/2010s, leading to price-to-income ratios in cities like Beijing over 20:1 (worse than many Western cities). This contributed to a phenomenon of Chinese youth feeling “inflation” in housing and education (like expensive tutoring for kids, etc.), even if consumer goods inflation is low. The Chinese government has recently taken measures to deflate the property bubble (allowing developer defaults, restricting speculative buying) precisely because high housing costs and debt were seen as threats to living standards and economic stability.
China also faces high costs in some “life expenses” that worry citizens: education is highly competitive and families spend a lot on tutoring (which the government tried to crack down on in 2021 by banning for-profit tutoring to reduce burdens), healthcare can be expensive out-of-pocket for advanced treatments (though basic healthcare is public, many seek better treatment privately or in big cities), and elder care is an increasing concern. These aren’t reflected in CPI as much but are part of cost-of-living anxiety in China.
Public sentiment in China about inflation has been relatively calm (since inflation is low), but there’s discontent about other things: unemployment (especially youth unemployment, which hit over 20% before the government stopped publishing the figure in 2023), lack of income growth for some segments, and the difficulty of affording housing/childrearing in top cities. The Chinese government has acknowledged these issues by launching measures to encourage consumption: for instance, they are boosting welfare spending and social safety nets to reduce the need for high precautionary savings (Chinese households save a lot partly because of limited pensions, healthcare costs, etc.). The government also ran programs like encouraging older people to spend (“silver economy”) and trade-in subsidies for consumer goods. These are aimed at raising the cost of living in a sense – or rather, raising spending and prices enough to avoid deflation.
In summary, while Americans and Europeans struggle with too-high living costs, China has been struggling with too-weak consumer spending. As the WEF piece put it, it’s *“very interesting… China is a mirror of exactly what [we see] in the US”*. The common thread is that both are trying to reach a healthy balance: the West is trying to cool inflation without crashing into recession, and China is trying to stimulate inflation (and demand) without rekindling bubbles. Both challenges relate to living standards: in the West, the concern is prices outrunning wages; in China, it’s wages (and jobs) not growing fast enough to encourage spending.
For cost-of-living metrics, one can also compare things like purchasing power parity (PPP). By PPP measures, Chinese incomes go further domestically than nominal exchange rates suggest, but still many Chinese, especially rural residents, live on low incomes. The U.K. was ranked around 33rd globally on cost-of-living index in 2023 (with higher being more expensive), whereas China was around 82nd (cheaper overall) according to some index sources. So indeed, day-to-day living costs in China (food, utilities, services) are generally lower, except for housing in certain areas. That’s why multinational companies often pay a premium to send employees to Western cities relative to Chinese cities.
Yet, crucially, wages in China are also much lower for most people. The average urban disposable income in China is around ¥40,000–¥50,000 (say $6,000–$7,000) a year, whereas in the U.S. it’s ~$45,000. So while prices are lower in China, so are incomes; affordability of certain goods (like cars, international products) can still be tough. For instance, a new iPhone might cost the equivalent of a month or two of income for a Chinese worker, versus perhaps a week’s income for an American worker.
One more difference: China did not see the kind of asset price surge post-COVID that the West did (in fact, Chinese stocks and property slumped in 2022), so Chinese households didn’t get the “wealth effect” that could cushion cost pressures. In contrast, some Western households, if they owned homes or stocks, saw wealth rises in 2020–21 that offset some inflation pain (until markets corrected in 2022).
In closing this comparison, the cost-of-living crisis is heavily context-dependent. The U.S., U.K., and EU dealt with high inflation eroding living standards, requiring tight monetary policy and targeted relief. China dealt with economic sluggishness and low inflation, requiring stimulus to boost living standards and consumption. As of late 2025, the U.S. economy was managing a “soft landing” with cooled inflation and still-growing wages, whereas China was trying to reignite confidence and spending without stoking long-term risks. Both are challenging in their own ways, but clearly Western consumers would envy China’s ~0% inflation, while Chinese policymakers would love to have a bit of the robust demand (and 3-5% inflation) that Western policymakers have been struggling to cool.