China’s new plan to get consumers spending again
BEIJING, CHINA – NOVEMBER 6: Women wearing Qing Dynasty-style costumes take photos at the Forbidden City in Beijing, China, on November 6, 2025.
Cheng Xin | Getty Images News
As Chinese households remain reluctant to spend on expensive goods, Beijing is turning to a new lever to stimulate consumption: experiences and everyday services.
The Chinese cabinet issued a statement on Thursday. study plan Policymakers have moved to boost consumption of services, from cruise and yacht tourism to aged care services and more sporting events, as they seek to increase consumption’s share of the economy over the next five years.
The plan aims to “accelerate the cultivation of new growth drivers in service consumption” and “improve and expand the supply of services”, the statement said.
Beijing’s new move comes as authorities seek to support domestic demand amid a prolonged housing slump, a gloomy job market and income uncertainty that has left consumers wary of big purchases. Concerns are also growing that last year’s export boom, which shielded the economy from U.S. tariffs, may be difficult to sustain.
While Beijing has introduced exchange subsidies to encourage sales of autos and home appliances, the recovery in spending has been uneven.
Retail sales up 3.7% in 2025 industrial production growth 5.9% and a broader economic expansion of 5%. While the consumption indicator fell to 0.9% in December, consumer inflation remained stable last year and producer prices fell for the third consecutive year, continuing a deflationary period that put pressure on corporate profits and wage expectations.
Early indicators compiled by the China Beige Book showed services consumption slowed sharply in January, with most subsectors including travel, accommodation and chain restaurants reporting broad-based weakness.
Despite this, economists have noted a clear shift in household preferences, with consumers increasingly allocating their spending to services rather than goods.
The People’s Bank of China’s quarterly survey for the fourth quarter of 2025 showed that the proportion of respondents planning to increase spending on social and entertainment activities in the next three months reached an eight-year high. Interest in spending more on “big ticket” items remains well below pre-pandemic levels.
Meanwhile, consumer priorities appeared to be changing.
“Emotional satisfaction is playing a larger role in retail spending, with a focus on buying for self-expression and experiences rather than material possessions or brand prestige,” according to a team of analysts at S&P Global.
The rating agency expects China’s retail sales excluding oil to increase by 2.7% in 2026 compared to last year, and services to increase by 5.5%.
Beijing’s action plan
One study plan In a report published on Thursday, China’s State Council said it would support “tourism-oriented” improvements to train stations and scenic railway routes, as well as improvements to yacht infrastructure, including public docks and piers.
Officials also said they would expand visa-free entry to more countries and add tax refund points at border crossings to increase inbound tourism.
The plan also called for the development of newer forms of service consumption tied to “emotional experiences” and encouraged policymakers to innovate rules with a more cautious approach to regulating emerging sectors.
Officials said they will increase supply for live performance and sporting events, encourage the launch of leading international competitions and promote high-quality outdoor sports destinations.
Banks were called on to extend credit to service-consumer firms and allow eligible companies in the fields of culture, tourism, education, sports and household services to raise funds through bond issuance.
A more developed services sector is closely aligned with China’s political goals at a time when stimulating retail demand through traditional means such as price cuts and promotions is “ineffective,” according to the Economist Intelligence Unit.
Chinese policymakers are turning to services for a variety of reasons. Share of service consumption per capita increased last year to 46.1%but still remains significantly lower than many global peersIt suggests room for growth.
Services are also generally more labor-intensive than manufacturing and remain China’s largest source of employment, according to the EIU. Expanding the sector could help offset youth unemployment, which has risen to alarming levels in recent years.
According to China’s 2020 census, the tertiary sector accounts for more than 48% of job seekers aged 16 to 24.
Calls for deeper reform
But economists have warned that the plan’s success depends on deeper reforms to raise household income and strengthen social welfare.
Ludovic Subran, Allianz’s chief investment officer, said boosting household consumption requires “restoring consumer confidence to unlock higher savings rates.” He said rebalancing towards domestic demand would also require “giving consumers jobs, time and income.”
Subran estimated that private consumption could increase by about 10 percentage points in GDP if China increased its share of household disposable income in GDP from the current 58% to the 70% to 75% range observed in developed economies.
With “underinvestment” in social services and out-of-pocket costs of medical services remaining high in rural areas, Chinese households are resorting to saving more of their income for emergencies or retirement, said Logan Wright, a partner at Rhodium Group.
“If the government invests more in social services, households will feel more secure and more likely to spend more generously,” Wright added.
Final consumption expenditure accounted for 56.6% of China’s GDP in 2024. World Bank dataThis is up from a low of 49.4% in 2010; 82.9% in the US, 81.7% in the UK and 74.7% in Japan.
