<\/p>\n
For decades, China\u2019s leaders have failed to heed calls to rebalance the economy toward consumption as they pursued an investment-heavy, export-oriented growth strategy.<\/p>\n
Now, a historic change is planned that \u2014 if successful \u2014 stands to reshape China\u2019s economic relations with the world. In coming days, President Xi Jinping and his officials will unveil the 15th Five-Year Plan, including a goal to spur a \u201csignificant increase\u201d in consumption by 2030 \u2014 language more urgent than previous Communist Party calls on domestic spending.<\/p>\n
With overcapacity cutting prices, a property slump eroding wealth and US President Donald Trump\u2019s protectionist push going global, the old growth model is challenged like never before. To power the next leg of expansion, Xi must convince his nation of savers to spend more on healthcare, tourism and other services as the middle class swells to 800 million people.<\/p>\n
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Currently stuck at an estimated 41% of GDP, Bloomberg Economics forecasts consumption will grow to make up 46% of the economy by 2030.<\/p>\n
\u201cStronger consumption would not only unlock China\u2019s next growth engine, it would help the world tap the full potential of its massive market,\u201d economists Eric Zhu and Chang Shu wrote in a note.<\/p>\n<\/p>\n
A bull case could see an even quicker advance, while a bearish scenario would see consumption\u2019s share continue to languish.<\/p>\n
A sustained recovery in consumer sentiment and spending will require bolder policies and cohesive execution from the government, the BE economists wrote. That should include structural measures, including child and elderly care subsidies, more efforts to increase the birthrate, and anti-involution measures to boost demand and tackle deflation.<\/p>\n
\u201cA more balanced Chinese economy underpinned by stronger domestic demand would generate far-reaching spillover effects globally,\u201d said Robin Xing, chief China economist at Morgan Stanley. \u201cChinese and foreign companies alike would benefit from the depth and scale of the China market, which would help cushion today\u2019s geopolitical challenges.\u201d<\/p>\n
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Economies strong in services may benefit more from the pivot, Xing said. As Chinese people become increasingly affluent, household consumption growth is most likely to be driven by services such as education and healthcare, rather than goods, he added.<\/p>\n
While officials seem more committed in their rhetoric toward boosting consumption, it\u2019s unclear how they\u2019re going to achieve it. Households\u2019 spending on goods is actually largely on par with the level seen in advanced economies \u2014 it\u2019s just that the goods they\u2019re consuming are often cheaper. That leaves making consumers spend more on services central to the rebalancing effort.<\/p>\n<\/p>\n
That focus on services creates a whole set of challenges.<\/p>\n
Healthcare and education are tightly restricted industries as Beijing seeks to avoid a cost spiral that deepens social inequality. That\u2019s meant efforts to date have tended to focus on stoking spending on so-called discretionary services such as tourism, recreation and sports.<\/p>\n
Officials scolded by Xi for over-investing in high-tech sectors and infrastructure are now nurturing new revenue streams such as regional football leagues, tourist sites, and street food. And while there\u2019s been glimmers of success \u2014 such as record spending over the recent Lunar New Year holiday \u2014 there are few signs of a meaningful pick up.<\/p>\n
There are structural, not just cyclical, reasons for the under-spending, too.<\/p>\n
China\u2019s social security safety net is meagre, especially for those living in the countryside, which encourages so-called precautionary savings. The government\u2019s social spending \u2014 including pensions, medical care, unemployment and low-income housing \u2014 was equivalent to 13.5% of GDP in 2024, Bloomberg calculations based on official data show, versus an average in OECD countries of 21.2%.<\/p>\n<\/p>\n
The inadequate and uneven social protection, coupled with a job market strained by intensifying trade tensions and the country\u2019s years-long housing slump, has prompted households to save rather than spend.<\/p>\n
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Household deposits exceeded 165 trillion yuan ($24 trillion) as of the end of 2025, with most being in low-return time deposits. More than 31% of disposable income is saved rather than spent, according to Bloomberg calculations based on government figures \u2014 much higher than the ratio in other major economies.<\/p>\n
There\u2019s a strategic rationale for the consumption imbalance, too.<\/p>\n
\u201cThe policy priority in this country has always focused on industry, on the manufacturing sector \u2013 in economic terms, on the trade-able sector \u2013 because that sector involves a lot of technology, a lot of the security-related issues,\u201d said Lu Feng, an economics professor at Peking University and an advisor to government agencies including the ministries of finance and human resources and social security.<\/p>\n
China is already the largest exporter in almost 60% of product categories and accounts for more than 20% of global export flows, according to Oxford Economics. Growing strength in higher-value added sectors such as autos will leave economies including Slovakia, Czechia, Hungary and South Korea most exposed to China\u2019s continued ascent, a recent paper from economist Artie Lam showed.<\/p>\n
Chinese leaders typically see consumption as a derivative of industrialisation and development, rather than a driver of growth in itself, meaning even as they envisage an increase in consumer spending, they\u2019re also aiming to keep manufacturing\u2019s share in the economy at a \u201creasonable\u201d level in the new five-year plan.<\/p>\n
\u201cOld habits die hard,\u201d said Morgan Stanley\u2019s Xing. \u201cWe are in a period of profound global change \u2014 a multi-polar world marked by persistent geopolitical tensions, where security increasingly takes precedence over growth. This naturally reinforces the view that manufacturing is the foundation of national strength and that industrial chains must be more competitive and self-sufficient.\u201d<\/p>\n
Echoing calls it has been making for 20 years now, the International Monetary Fund last month faulted China\u2019s economic policies for causing waste at home and damage abroad and called for a reorientation by Beijing to embrace a model based on domestic consumer spending.<\/p>\n
\u201cTransitioning to a consumption-led growth model should be the overarching priority,\u201d the IMF\u2019s executive directors said in a statement alongside the Washington-based lender\u2019s Article IV annual review.<\/p>\n
Per capita GDP now exceeds $13 000 and China\u2019s middle-income group is expected to double to top 800 million over a decade. A low birth rate and population ageing mean the greatest opportunity in services may lie in industries such as aged care.<\/p>\n
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The number of elderly people with disabilities and dementia exceeds 45 million, according to data from the China Research Centre on Ageing. That\u2019s nearly 14 times the number of nursing home beds available.<\/p>\n
Qi Yunlan, a researcher with the Development Research Centre of China\u2019s State Council, identified elderly and child care, tourism and sports as among the areas where supply could be improved to encourage consumer spending. Digitalisation should be promoted and market access barriers torn down to make allocation of resources more efficient, she wrote in an article published by the state-run Economic Daily on Tuesday.<\/p>\n
Opening up the health sector is gaining momentum, albeit gradually, as authorities look to unlock wealthy people\u2019s demand for high-end services and tap the expanding global medical tourism market.<\/p>\n
Last year, China\u2019s first fully foreign-owned general hospital was launched in Tianjin. The owner, Singapore-based Perennial Holdings Pte, has developed four hotels adjacent to the institution to meet the needs of medical tourists. It also runs elder care projects with a total of over 1,800 beds in the vicinity \u2014 a model encouraged by policymakers.<\/p>\n
To spur consumers, the government in July started providing subsidies for purchases of services including bathing assistance and rehabilitation nursing for some disabled senior citizens. It also began handing out childcare subsidies, while preschool fees are gradually being waived to ease education costs.<\/p>\n
The initiatives fall under a new policy banner: \u201cInvesting in People,\u201d a concept that marks a critical change in Beijing\u2019s long-standing strategy of prioritising capital-goods investment.<\/p>\n
Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation, a think tank affiliated with the Ministry of Commerce, expects the consumer market will grow steadily over the next five years.<\/p>\n
\u201cIt will be easier for foreign companies to access the China market,\u201d Zhou said. Still, officials remain committed to their export ambitions as foreign demand is a critical growth driver for companies and \u201cthat diversity is greater than what the domestic market alone can offer.\u201d<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
#eyes #consumers #lead #era #Chinas #unbalanced #economy<\/p>\n","protected":false},"excerpt":{"rendered":"
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