Consumers in Wuzhou City, Guangxi Zhuang Autonomous Region, testing electric scooters on March 21, 2025, with subsidies for trade-ins of new-energy vehicles Photo: IC PHOTO

The 2024 Central Economic Work Conference urged efforts to vigorously boost consumption, improve investment efficiency, and expand domestic demand on all fronts. The strategic deployment by the Central Committee of the Communist Party of China to expand domestic demand represents not only a timely response to current constraints in consumer spending but also a forward-looking approach to achieving high-quality economic development. Stimulating consumption across sectors constitutes a complex, systemic endeavor. As such, it requires a holistic perspective—one that centers on consumers, consumer goods, and the consumption environment, while consolidating foundations of domestic consumption.

Tangible policy outcomes

Recent policies aimed at stimulating consumption and improving livelihoods have yielded tangible outcomes in enhancing consumer capacity, expanding service consumption, fostering emerging consumption patterns, and optimizing the consumption environment.

First, overall consumption capacity has improved. Consumer demand has been activated through the coordinated use of both stock and incremental policy tools, including the “two new” policy—which promotes large-scale equipment renewals and trade-ins of consumer goods—and special initiatives to boost consumption. These interventions have not only expanded but also upgraded spending on big-ticket items. According to the China Association of Automobile Manufacturers, sales of domestic new energy vehicles reached 12.87 million units in 2024, a 35.5% increase year-on-year. The Ministry of Commerce also reported over 2.59 million vehicle replacement applications nationwide in 2024 under trade-in programs.

Second, service consumption has both expanded and improved. A targeted policy mix—focused on developing the service sector and elevating service quality—has stimulated more diverse and sophisticated demand. According to the National Bureau of Statistics (NBS), the share of per capita spending on services rose by 0.9% in 2024, while retail service sales grew by 6.2%. The Blue Book of Silver Economy (2024) reported that the market size of China’s silver economy reached 7 trillion yuan, or 6% of GDP. Meanwhile, emerging trends such as the “ice and snow economy” and “debut economy” have emerged as new engines of growth.

Third, new consumption models are gaining momentum. Instant retail and green consumption sectors have posted robust growth. In 2024, online retail sales of physical goods rose by 6.5% year-on-year, according to the NBS. Subsidy policies further boosted sales of new energy vehicles by 9.3%, while over 90% of home appliances sold met top-tier energy efficiency standards. Moreover, by 2023, China had become the world’s third-largest market for organic products.

Fourth, the broader consumption environment has improved. On the regulatory side, initiatives like the “worry-free consumption” campaign and the refined regulations for the implementation of the nation’s law on the protection of consumer rights and interests have strengthened market oversight and improved user experience. In 2024, the State Administration for Market Regulation recovered 4.72 billion yuan in consumer losses—a 17.1% increase year-on-year. Meanwhile, infrastructure is expanding rapidly: the National Energy Administration reported the completion of 12.35 million charging stations by November 2024, marking a 50% increase over the previous year.

Constraints on boosting consumption

A balanced evaluation of consumption requires attention to both achievements and ongoing challenges. According to NBS data, from March to December 2024, year-on-year growth in total retail sales of consumer goods remained below 5%, dipping as low as 2%—a sign of persistently subdued consumer activity. Three key constraints continue to weigh on demand.

First, both consumers’ capacity and willingness to spend remain limited. In 2024, wage income made up just 56.46% of per capita disposable income—well below the norm in most developed economies. Wide gaps in urban-rural income and pension distribution also persist, underscoring the need for a more equitable income framework to unlock consumption potential. Meanwhile, Chinese households continue to exhibit strong precautionary saving behavior: the national savings rate remains above 40%, far higher than in developed economies. At the same time, rising concerns over algorithmic price discrimination on digital platforms have eroded consumer trust, further dampening engagement with new consumption models.

Second, supply and demand remain misaligned. On the supply side, high-end goods are scarce, low-end goods are oversupplied, and cost-effective mid-tier products are lacking—resulting in a market structure too sluggish to stimulate robust demand. Meanwhile, structural shifts in consumer behavior are highlighting deeper imbalances, with underdeveloped service consumption emerging as a core constraint. In 2024, final consumption accounted for less than 40% of China’s GDP—more than 20 percentage points lower than in the United States (67%). This gap stems largely from the limited role of services, which made up just 26% of consumption in China compared to 55% in the US. In essence, China’s consumption shortfall reflects inadequate service consumption.

Third, multiple bottlenecks continue to constrain consumption. Current policy tools rely heavily on subsidies, with insufficient focus on long-term income support—raising concerns about demand overdraft. Institutionally, regulatory frameworks have not kept pace with new consumption formats, fueling an increase in consumer disputes. According to the China Consumers Association, consumer complaints rose by 32.6% year-on-year in 2024.

A systemic approach in need

As a key principle in China’s comprehensively deepening reform efforts, systems thinking should be fully integrated into policies aimed at boosting consumption and improving livelihoods. Strengthening domestic demand calls for coordinated action across three dimensions: consumers, consumer goods, and the broader consumption environment.

On the consumer side, the focus must shift toward building a diversified income growth mechanism to drive sustainable consumption. Rather than relying on short-term stimulus, policy frameworks should prioritize long-term income resilience, addressing the root causes of weak consumption capacity and limited spending willingness.

First, raising the share of property income can significantly boost consumption. The marginal propensity to consume (MPC) directly formed by the increase in disposable income tends to be higher than the MPC generated by the increase in net wealth assets. However, the consumption tendency decreases with the growth of disposable income and increases with the rise in net wealth assets. To boost household consumption propensity, in the near term, policy should emphasize wage growth; over the longer term, efforts should aim to raise income expectations and expand sources of property income.

Second, improving employment quality is essential for creating a robust income base. High-quality industrial development should serve as a catalyst for high-quality employment. Through intelligent upgrading of manufacturing and the upscale evolution of services, the economy can generate more high-quality jobs. Simultaneously, expanding access to property income channels and strengthening financial literacy—such as through investor education—will help households convert idle assets into active consumption power. A national wealth management platform could serve this goal.

Third, refining the social security system is key to reducing precautionary savings. Measures such as interregional fiscal coordination and urban-rural mutual support can contribute to common prosperity. Public spending should focus more on low- and middle-income groups, ensuring equitable access to essential services like education, healthcare, and elderly care—thereby easing anxieties that inhibit consumption.

On the supply side, enhancing consumption requires sustained upgrades in supply quality to better meet evolving demand. A balanced, coordinated approach is essential—guided by supply-side structural reform, enabled by digital intelligence, and extended through service-oriented growth.

First, new quality productive forces can drive supply-side transformation. Technologies from strategic emerging sectors—such as biomanufacturing, aerospace, and deep-sea exploration—should be systematically integrated into the consumer market to foster a more adaptive, balanced supply-demand ecosystem.

Second, digital transformation can help close the supply-demand gap. A government-led initiative should establish a national big data platform for consumption, integrating online and offline behavior data to enable real-time market monitoring and smart demand forecasting. A data-driven product life-cycle traceability system could also improve supply-side quality control and enhance consumer safety.

Third, the expansion of service supply should be promoted across a broader range of sectors. Beyond improving access to education, healthcare, cultural activities, and intelligent elderly care, efforts must also target urban-rural and regional disparities in service provision. Urban planning should be improved, with accelerated efforts to grant rural migrants permanent urban residency, while economies of scale should be leveraged to reduce service provision costs and diversify service supply formats—promoting both the scale and scope of service consumption.

Improving the consumption environment requires resolving circulation bottlenecks and building a unified national consumption ecosystem. A systemic approach to upgrading governance is essential—one that addresses market fragmentation, strengthens oversight, and reduces the cost of consumer rights protection. Through comprehensively deepening reforms, a unified, efficient, and smoothly functioning national consumption ecosystem can be established.

First, institutional barriers—such as blocked market, fragmented regulation, and high costs for cross-regional consumer rights enforcement—should be addressed. Eliminating local protectionism, administrative fragmentation, and market monopolies will accelerate regional integration, advance the development of a unified national market, and promote fair and consistent market regulation while preventing insular economic cycles.

Second, ethical governance in the platform economy should be strengthened by implementing full-process information disclosure standards, algorithm audit mechanisms, and dynamic oversight systems. Greater transparency in price formation and stronger user data protections will help curb algorithmic discrimination and other monopolistic practices—ensuring a fair, orderly, and equitable digital consumption environment.

Third, infrastructure and institutional support—such as exhibition venues, payment systems, logistics networks, and after-sales services—should be optimized. Establishing a service quality rating system, enhancing dispute resolution efficiency, and diversifying resolution pathways can provide a fair competitive environment for businesses while safeguarding the legitimate rights and interests of consumers.

Adopting a systemic approach to promoting consumption and enhancing livelihoods requires demand-side management to strengthen consumers’ capacity to spend, supply-side reform to foster willingness, and environmental optimization to build confidence. Together, these measures aim to construct a consumption ecosystem in which consumers are motivated, goods are responsive to demand, and the environment is conducive—jointly driving sustained and healthy consumption growth.

Fu Lianying (professor) and Cai Yu are from the School of Economics and Finance at Huaqiao University.