Policy focus on consumption to drive growth

China's pro-consumption initiatives — a top priority of the country's policy agenda for this year — are expected to shore up consumer confidence and unleash 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 this month 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, said that 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.

Sun highlighted the need for a comprehensive policy mix to spur consumption, including short-term moves such as issuing consumption coupons, as well as long-term spending on strengthening the social security network.

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.

Driving force

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.

Xing said that apart from short-term consumption subsidies, the more fundamental solution lies in social security reforms, such as offering easier access to public housing and healthcare for migrant workers, which will reduce their precautionary saving habits and unleash huge consumption potential.

According to the 2025 Government Work Report, China will double its ultra-long-term special treasury bonds earmarked for expansion of the consumer goods trade-in program to 300 billion yuan this year, amid a broader drive to boost domestic demand and spur economic growth.

Data from the NDRC shows that under the trade-in program, retail sales of new energy passenger vehicles nationwide reached around 1.34 million units in the first two months, up 26 percent year-on-year, while sales of home appliances featuring the highest level of energy efficiency surged 36 percent year-on-year to 24.1 billion yuan during the same period.

Jia Shaoqian, chairman of Chinese home appliance manufacturer Hisense Group, said the country's trade-in program has not only stimulated the consumer market and bolstered consumption upgrades, but has also significantly promoted the green transformation of the home appliance industry, while improving people's quality of life.

Purchasing appetite

In order 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.

Hideki Ozawa, executive vice-president of Japanese tech company Canon, said, "We are confident that with the support of national consumption promotion policies, we can return to the golden era of the camera market."

China's focus on consumption-led growth serves as a powerful driver of economic stability and will contribute to the country's overall economic recovery, Ozawa added.