Experts see policy shift as key to boosting domestic demand, innovation amid external challenges

China’s pro-consumption initiatives — a top priority of the country’s policy agenda for this year — are seen shoring up consumer confidence and unleashing the potential of domestic demand to stimulate economic growth, while hedging the impact of the United States’ tariff hikes, said officials, economists, and executives.

They noted that China has demonstrated firm determination to further vitalize the consumer market and address prominent constraints on consumption by bolstering people’s well-being amid rising trade protectionism and external uncertainties, with a particular focus on stabilizing jobs, increasing household income, and alleviating financial burdens.

A comprehensive policy package to boost consumption will accelerate the country’s shift toward a consumption-driven growth model from an export- and investment-led growth model, they said.

The economists and executives also projected a robust recovery for China’s consumer market this year, with concrete measures aimed at strengthening consumers’ ability and willingness to spend gradually taking effect.

President Xi Jinping has emphasized efforts to expand domestic demand, as well as establish and improve a long-term mechanism for expanding residents’ consumption, so that residents can consume with the help of stable income, dare to consume without worries, and are willing to consume due to the excellent consumption environment and strong sense of gain.

Xi, who is also general secretary of the Communist Party of China Central Committee, made the remarks when attending the second group study session of the Political Bureau of the 20th CPC Central Committee in January 2023.

According to the Central Economic Work Conference held in December last year, the foremost priority for policymakers in 2025 is to vigorously boost consumption, improve investment efficiency, and expand domestic demand on all fronts. This year’s Government Work Report also listed boosting consumption as a top priority among major tasks for 2025.

China will make expanding domestic demand a long-term strategy, while solid measures should be taken to stabilize employment, boost incomes, and create demand with high-quality supply, Premier Li Qiang said earlier in April when chairing a symposium on the economic situation.

The fifth China International Consumer Products Expo, which was held last week in Haikou, Hainan province, is a strong testimony to the vitality and resilience of the nation’s consumer market.

The event attracted more than 60,000 professional purchasers, a 10 percent increase from last year, with the value of intended deals reaching around 92 billion yuan ($12.6 billion).

To stimulate domestic demand and solve key challenges weighing on consumer sentiment, the general offices of the CPC Central Committee and the State Council, China’s Cabinet, recently issued a special action plan for boosting consumption.

Li Chunlin, deputy head of the National Development and Reform Commission (NDRC), said unlike past policies that primarily targeted the supply side, the new plan places great emphasis on stepping up policy support on the demand side by raising people’s income and reducing financial burdens.

The plan calls for promoting wage growth by strengthening employment support and raising minimum wage standards in a scientific and reasonable manner, and it includes stabilizing the stock market to expand property income channels, he said, adding that these measures will give consumers more stable expectations and greater confidence in their spending power.

He said that dedicated efforts have been outlined in the plan to integrate consumption growth with improving people’s livelihoods, such as easing household burdens in areas like child care, education, healthcare, and old-age insurance.

The country is drafting a child care subsidy plan and will expand financial assistance for basic medical insurance.

“China’s efforts to boost domestic demand can offset the impact of US tariff hikes,” said Sun Xuegong, director of the department of policy study and consultation at the Chinese Academy of Macroeconomic Research, an NDRC think tank, while emphasizing that the nation’s economic fundamentals are sound, with a strong manufacturing sector and great market potential.

Pan Helin, a member of the Ministry of Industry and Information Technology’s Expert Committee for Information and Communication Economy, said that expanding domestic demand by boosting consumption could effectively help buffer external headwinds and prop up economic vibrancy.

The consumer-centered stimulus measures will reduce China’s reliance on exports and investment for growth and facilitate its transition to a more consumption-led economy in the face of an increasingly complicated international situation and sluggish global recovery, Pan said.

Consumption has become the main driving force behind China’s economic growth.

Last year, the final consumption expenditure contributed 44.5 percent to the nation’s GDP growth, surpassing investment and exports, and drove a 2.2 percentage point increase in GDP, according to data released by the National Bureau of Statistics.

Robin Xing, chief China economist at Morgan Stanley, said it would be “a brilliant idea” for China to take bigger reform steps to transfer more State-owned capital to the social security system, in order to enhance migrant workers’ benefits as a key means to driving consumption growth.

“China is trying something new — a more proactive fiscal policy with a greater focus on consumption,” he said, adding that about one-fourth of this year’s increment in augmented fiscal deficit, worth around 2 trillion yuan, will be spent on consumption-related areas such as subsidizing an expanded consumer goods trade-in program and boosting social welfare.

To further stimulate the purchasing appetite of consumers, Li Gang, director of the Department of Market Operation and Consumption Promotion at the Ministry of Commerce, underscored that more efforts will be made to accelerate the development of service-based consumption.

Efforts will also be made to nurture diversified purchasing scenarios and new types of consumption in the digital, green, and intelligent fields, Li added.

Zou Yunhan, deputy director of the Macroeconomic Research Office at the State Information Center’s Department of Economic Forecasting, said that China’s consumption market is poised for steady growth this year, fueled by a series of supportive measures.

Zou highlighted that new business forms and new models related to consumption can better meet people’s demand for consumption, upgrading and motivating their purchasing enthusiasm, which in turn will provide fresh momentum and robust support for the sustained growth of the consumer market.

“The shock that China is facing this time also presents an opportunity — a rare chance to transform its development model,” said Wang Yiming, vice-chairman of the China Center for International Economic Exchanges.

“If we can truly use this opportunity … then the trade war initiated by the US — despite the challenges — may actually offer us valuable impetus for change,” he said.

“The priority is to take strong measures to comprehensively expand domestic demand and stabilize the fundamentals of the domestic economy, smoothing and strengthening domestic circulation.”

Wang’s views were shared by Zhang Yansheng, a researcher at the Chinese Academy of Macroeconomic Research.

Zhang said that to respond to US economic bullying, China must vitalize all market entities by bolstering people’s expectations and deepening reforms to give the market a bigger say.

Xing, at Morgan Stanley, emphasized China’s tech-focused initiatives, saying the country has put in place multichannel funding support, including a relending program, a State venture capital guidance fund, and the upcoming “sci-tech board” in its bond market, for frontier sectors like artificial intelligence, quantum computing, and self-driving cars.

“Leveraging its robust and comprehensive industrial ecosystem, China creates expansive real-world testing grounds and vast market opportunities for technological innovation,” said Zhang Li, president of the China Center for Information Industry Development.

“This infrastructure not only accelerates the development of emerging industries but also provides a resilient foundation for nurturing future-oriented sectors poised to redefine global markets.”

Contact the writers at fanfeifei@chinadaily.com.cn