by Wang Zhen
China's latest Government Work Report signals a significant shift in policy priorities, placing boosting consumption at the top of the economic agenda—up from third place last year. The report emphasizes a stronger link between consumption and investment, addressing domestic demand shortfalls and making internal consumption the primary driver of economic growth.
To decode the government's approach, Jiemian News invited Wang Qing, Chief Macro Analyst at Golden Credit Rating, and Wu Chaoming, Chief Economist at Caixin Financial Holding Group to provide insights.
Wu Chaoming highlights that consumption is fundamentally tied to income. The government's strategy starts with increasing household earnings, particularly among low- and middle-income groups, while reducing their financial burdens. Policies such as the "trade-in" program for durable goods further reinforce this effort by facilitating access to new purchases.
Beyond income, consumer willingness to spend is crucial. Not all products appeal to consumers, and the government recognizes the need for high-quality supply. Sectors such as healthcare, elderly care, childcare, domestic services, digital consumption, and green smart technologies have vast potential but remain underdeveloped. The government aims to enhance offerings in these areas, making consumption more attractive and accessible.
Additionally, the report underscores the importance of improving the consumer environment. Measures like optimizing vacation policies and tapping into cultural, tourism, and sports-related spending are expected to drive higher consumption. Wu forecasts a rise in China's consumption growth rate to around 4%–4.5% this year, surpassing last year’s levels.
Wang Qing states that expanding domestic demand will focus on two pillars: significantly boosting consumption and actively increasing effective investment, with consumption being the top priority. Given the current low levels of consumption growth and inflation, there is considerable untapped potential in both goods and services.
He sees fiscal policy as a critical driver of consumption growth. A notable shift in the government’s approach is its increased emphasis on public welfare and consumption rather than pure investment expansion. For example, the government will, for the first time, roll out nationwide childcare subsidies to address declining birth rates. This year's subsidy allocation is expected to reach the trillion-yuan level. Additionally, financial support for the "trade-in" program for durable goods will double from 150 billion yuan last year to 300 billion yuan in 2025, which is projected to generate 700–800 billion yuan in additional spending and accelerate goods consumption growth by 1.5–1.6 percentage points.
Monetary policy will also play a role, though in a more targeted manner. The report suggests optimizing structural monetary policy tools to better support real estate and stock markets, technological innovation, green development, and small and medium-sized private enterprises. Notably, it introduces a focus on boosting consumption, signaling that the central bank may establish new consumer credit support tools to lower borrowing costs and increase available funds for household spending.
A key development in this year’s report is the push to enhance comprehensive consumption statistics. Wang Qing points out that services now account for approximately 45% of total household consumption, including sectors like travel, which are poised to drive future spending growth. However, China’s current statistics on service consumption are limited, primarily tracking overall retail spending without detailing its composition. This lack of granular data hinders effective policy adjustments.
In late 2024, the National Bureau of Statistics reformed the method for calculating urban homeowners' housing services, shifting from a cost-based approach to a rental-based approach. As a result, the total GDP data was revised upward. This move suggests a broader effort to improve service consumption statistics, ensuring a more accurate reflection of economic trends and enabling better policy responses.
Wu Chaoming also underscores the necessity of fully integrating service consumption into official statistics. He warns that an incomplete statistical system risks distorting macroeconomic policy decisions. Service consumption now exceeds 40% of per capita household spending and is growing faster than goods consumption. Yet, current data only include limited categories such as food services while excluding critical sectors like transportation, lodging, education, healthcare, sports, tourism, and entertainment.
With service consumption now a vital pillar of China’s economy, Wu calls for an urgent reform in statistical methodologies to incorporate these underrepresented categories. A more comprehensive dataset will provide a clearer picture of household consumption trends and support more effective policy decisions aimed at sustaining economic growth.