Nation sets 'expansion of domestic demand' as major priority for this year

China is ramping up efforts to strengthen the service sector as part of a broader push to boost domestic demand and consumption, a move that senior officials and experts said will bolster economic resilience and promote structural optimization.

The remarks came after this year's Government Work Report called for "enhancing the capacity and quality of the service sector", while listing "the expansion of domestic demand" as a major priority.

According to the report, China will work to boost the quality, diversity and accessibility of consumer services, while also promoting the integrated development of advanced manufacturing and modern services. It will further improve national service-sector standards and cultivate the "China Services" brand.

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Zhu Keli, founding director of the China Institute of New Economy, said with expanding domestic demand prioritized in policymaking, enhancing the service sector in both capacity and quality is not only essential for stable economic performance, but also an inevitable response to the ongoing upgrading of consumer demand.

"The service sector has a strong capacity to create jobs and broad spillover effects across industrial chains, making it one of the most direct, effective and sustainable levers for expanding domestic demand and streamlining economic circulation," Zhu added.

The stronger policy focus on the service sector also reflects the changing consumption patterns among Chinese households.

China's retail sales of services rose 5.5 percent year-on-year in 2025, 1.7 percentage points faster than goods retail sales, while spending on services accounted for 46.1 percent of per capita consumer expenditure, Kang Yi, head of the National Bureau of Statistics, said at a news conference in January.

He highlighted that as living standards continue to improve, household consumption in China is shifting from a goods-dominated model toward a more balanced mix of goods and services, steadily unlocking the potential of service consumption.

Despite the favorable market trend, China's service sector still has significant untapped potential, Shen Danyang, director of the Research Office of the State Council, said. Whether by international standards or in light of the country's own development needs, the sector's overall capacity, quality and efficiency still need to be further enhanced.

Highlighting "enhancing capacity and quality" as the central focus of the authorities' latest push, Shen, who also headed the group that drafted this year's Government Work Report, said that "enhancing capacity" refers to expanding the supply of quality services and cultivating more competitive service providers, so as to address the mismatch between supply and demand.

"Improving quality", meanwhile, is about making services more specialized, standardized and value-added, while avoiding low-end, homogeneous competition and steering the sector toward higher-quality development, Shen added.

Zhu, the founding director, said modern services — including technology, information, tourism, wellness and green services — are growing fast and are among the most promising new engines of economic growth.

Chinese tech heavyweight Alibaba Group, for instance, has posted solid growth in cloud services and smart applications in recent years. Revenue at its Cloud Intelligence Group rose 34 percent year-on-year, according to the company's September quarter 2025 results.

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Wu Yongming, chief executive officer of Alibaba Group, said the company remains in an investment phase, focused on building AI capabilities and infrastructure, while also developing a broader consumer platform that combines local services with e-commerce to create long-term strategic value.

According to data from research institutions, value-added output in the software and information technology services sector is expected to grow by around 12 percent annually over the next five years, while the market for AI application services alone could exceed 800 billion yuan ($116.39 billion) a year, Shen said at a recent news conference outlining the key points of this year's Government Work Report.

Looking ahead, Shen said the authorities will support the application of technology, promote the integration of technology with real-world applications, and foster the development of high-value-added, innovation-driven service industries.

In addition, further efforts will be made to remove institutional barriers holding back the development of the service sector, expand trade in services, and advance the orderly opening-up of the services market, Shen added.

Zhang Chenxu contributed to this story.

Contact the writer at zhangchenxu@chinadaily.com.cn