News analysis
On March 25, the Shanghai Municipal Bureau of Statistics released its 2024 statistical bulletin, revealing that the city’s permanent resident population declined by 72,000 people from the previous year, bringing the total to 24.8026 million. Most notably, Shanghai’s permanent migrant population fell below 10 million for the first time since the People’s Republic of China began keeping records.
The migrant population, which includes workers and professionals whose official residence is in other parts of China, as well as expatriates, had peaked at 10.48 million in 2020.
Moreover, the total fertility rate of Shanghai residents has fallen to 0.6, lower than even that of South Korea, the country with the lowest TFR on earth. A TFR of 2.1 is necessary for maintaining a population at the same size.
That number has since steadily declined since, particularly during the novel coronavirus pandemic, when Shanghai was subject to strict “zero-COVID” lockdowns.
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This demographic shift is significant because Shanghai has long been a magnet for talent and economic activity. The declining migrant population suggests a weakening labor market, rising costs of living, and diminishing economic opportunities.
Consumer spending decline
Adding to Shanghai’s economic woes, retail consumption is experiencing a sharp downturn. According to data released on March 18, the city’s total retail sales of consumer goods fell by 1.0 percent year-on-year in January-February 2025 to 277.74 billion yuan. However, when compared to the officially reported figure for the same period in 2024, the decline was a much steeper 11.1 percent.
This contraction in consumer spending is particularly concerning given that nationwide retail sales of consumer goods grew by 4.0 percent in the same period. For the entire year of 2024, Shanghai’s total retail sales fell by 3.1 percent, while national retail sales grew by 3.5 percent. Given that Shanghai has traditionally been a leader in consumption, these figures suggest that other Chinese cities are likely experiencing an even more severe downturn.
Moreover, Shanghai’s weak consumption data is especially troubling because it includes the Chinese New Year holiday, which is typically a peak spending period. This suggests that consumer confidence remains fragile and that spending could decline further throughout the year. While the National Bureau of Statistics may attempt to “massage” future figures to maintain the appearance of growth, the underlying trend points to a significant slowdown.
Deflationary pressures persist
Shanghai is also struggling with persistent deflation. In February 2025, the city’s consumer price index (CPI) dropped by 0.7 percent year-on-year and 0.3 percent month-on-month, aligning with the national trend. Meanwhile, producer prices continue to decline, albeit at a slower pace. The producer price index (PPI) fell by 0.3 percent year-on-year in February, an improvement from the 2.8 percent drop in January. Purchasing prices for industrial producers also declined by 0.3 percent.
Deflation typically signals weak demand and economic stagnation, which can lead to a vicious cycle of reduced investment, falling wages, and further economic contraction. Despite government efforts to stimulate spending, Shanghai’s data suggests that demand remains subdued.
On February 12, Bloomberg reported that a BlackRock fund had forfeited two towers at Waterfront Place in Shanghai to Standard Chartered after opting not to repay a syndicated loan. The fund had originally taken out a 780 million yuan loan for the properties in 2018.
Furthermore, reports from March 28 revealed that BlackRock was selling its last major asset in Shanghai — Trinity Place in Putuo District — for 900 million yuan. The asking price represents a 34 percent loss compared to what BlackRock paid for the property in 2017. This retreat by one of the world’s largest asset managers underscores the diminishing appeal of Shanghai’s real estate market.
‘Special action plan’
In an effort to counteract the economic downturn, the Chinese government announced a “special action plan to boost consumption” on March 16. The plan, issued by the CCP General Office and the State Council General Office, includes 30 key tasks across eight focus areas. While the details remain vague, such measures indicate that Beijing is aware of the severity of the economic slowdown and is attempting to stimulate domestic demand.
Shanghai’s economic struggles serve as a warning sign for the rest of China. “If Shanghai — the city whose consumer spending was significantly stronger than others — saw a sharp drop in consumption in the January-February 2025 period (down 11.1 percent in real terms), then consumer spending in other parts of China is likely to be much worse,” a March 31 newsletter analysis by risk consultancy SinoInsider reads.
The generally bleak prospects nationwide “could be one of the driving factors behind the central government’s ‘special action plan’ to boost consumption,” the analysts wrote.
