Diversified consumption not only meets the growing needs of the people, but also drives economic momentum. Photo: IC PHOTO

In July 2026, in outlining economic priorities for the second half of the year, the Political Bureau of the CPC Central Committee emphasized the need to effectively expand domestic demand, optimize supply to meet diverse consumer needs, and tap into the potential of service consumption. As Chinese residents’ consumption shifts from a goods-dominated pattern toward a more balanced mix of goods and services, needs are becoming increasingly differentiated by age, income level, and family structure. Boosting consumption therefore requires moving beyond broad-based demand stimulus toward more targeted support for families. The family is the fundamental unit in decisions concerning employment, income, savings, consumption, and debt. Greater emphasis should therefore be placed on the family as a fulcrum for consumption, with policies integrating stable employment, income growth, stronger social protection, reduced household burdens, and improved supply to translate latent demand into effective purchasing power.

New changes in household consumption

China’s consumption market currently combines pressure on overall growth with accelerating structural transformation. In the first half of 2026, total retail sales of consumer goods reached 24.87 trillion yuan, up 1.3% year on year. The underlying consumption base remains resilient, but the foundation for recovery is not yet solid. While overall growth has moderated, positive structural shifts are underway. In the first half of 2026, retail sales of services grew by 5.3%, significantly outpacing the 1.1% growth in goods retail sales. Demand for culture and tourism, sports, health, elderly care, childcare, and domestic services is becoming a major driver of consumption growth. Another prominent trend is tiered consumption and selective upgrading. Consumers are placing greater emphasis on value for money when purchasing general goods, while remaining willing to spend on health-related, interest-driven, cultural, and experiential services—indicating that quality consumption and new forms of consumption remain highly resilient.

Differences among family types also merit close attention. Young families are primarily constrained by employment, housing rental costs, and the expenses associated with marriage and childbearing. Families with young children, meanwhile, face sustained spending pressures from housing, childcare, and education, while elderly households have growing demand for medical care, health and wellness services, age-friendly renovations, and cultural tourism. Middle-income families are more concerned about asset values and future income prospects, whereas low-income families are mainly constrained by limited capacity to meet basic consumption needs. Consumption potential is also being released unevenly across urban and rural areas. In the first half of 2026, retail sales in rural areas grew by 2.5%, compared with 1.2% in urban areas, indicating considerable untapped potential in county-level and rural markets.

Household decision-making mechanisms

Household consumption reflects decisions about how income is allocated between present and future needs. These decisions are shaped not only by current disposable income but, more fundamentally, by households’ expectations regarding long-term income, future expenditures, and risk. Employment and income determine spending capacity, social protection shapes willingness to consume, asset–liability structures constrain room for spending, and the supply of goods and services determines whether latent demand can be translated into actual consumption.

Wage income is the primary source of household income, and employment stability and expectations for income growth directly affect household spending plans. Greater income uncertainty not only suppresses current consumption but also prompts households to increase precautionary savings. Housing has a dual impact on consumption: on one hand, it is the most important asset for most urban households, meaning that expectations regarding property values affect perceptions of wealth and consumer confidence; on the other hand, mortgage payments create cash-flow pressure, crowding out spending on everyday goods and services. Stabilizing the real estate market is therefore directly linked to repairing household balance sheets and increasing households’ propensity to consume.

Meanwhile, supply and demand remain mismatched in some areas of the consumer market. Demand for inclusive childcare, elderly care, domestic services, health, and cultural tourism continues to rise, yet supply in some of these fields remains inadequate, preventing some latent demand from being converted into actual spending. Boosting consumption, then, cannot rely on any single policy measure. It requires a coordinated approach that strengthens household consumption capacity, eases household anxieties, and improves the supply of consumer goods and services.

Enhancing household consumption capacity

Stable employment is the foundation of consumption growth. Efforts should be intensified to support employment among college graduates, rural migrant workers, and those facing employment difficulties, while vocational training and public employment services should be improved and stronger safeguards put in place for workers in flexible and emerging forms of employment. Enterprise compensation surveys and wage-growth guidance mechanisms should also be improved, together with wage-setting mechanisms for skilled workers, to ensure that labor remuneration rises in step with labor productivity.

An income growth initiative for urban and rural residents should be implemented to increase wage, business, property, and transfer income in a coordinated manner. Given the relatively weak growth of property income, efforts should be made to improve the stability of capital-market investment returns, encourage listed companies to maintain consistent dividend payouts, develop well-regulated and sound inclusive wealth-management products, and bring idle urban and rural assets into productive use in accordance with the law. Greater support should also be provided to skilled workers, workers in emerging forms of business, and new types of agricultural business entities to steadily expand the middle-income group.

Increasing the consumption capacity of low-income households can produce a more direct effect on consumption growth. The dynamic monitoring and tiered, category-specific assistance system for low-income groups should be strengthened, with greater employment support and transfer payments provided to low-income families, rural households facing hardship, and the unemployed. In the short term, cash subsidies could be combined with targeted vouchers for service consumption, both safeguarding basic living needs and supporting spending on personal development, including cultural and sports activities.

The personal income tax system should also take fuller account of the actual burdens borne by families. In light of socioeconomic development and changes in household expenditures, the amounts deductible for children’s education, infant and toddler care, support for the elderly, and other special additional deductions could be appropriately increased. Research should also explore adding deductions for inclusive childcare and at-home elderly care. Targeted, time-bound support should be provided to young people, new urban residents, and families with multiple children.

Alleviating household consumption anxieties

Boosting consumption requires not only increasing current income but also giving households a greater sense of security about the future. The pension, healthcare, and social assistance systems should be continuously improved, with broader coverage for outpatient care under pooled medical insurance and lower out-of-pocket costs for families facing serious or chronic illnesses. Mechanisms for direct cross-regional settlement of medical expenses should also be refined. Inclusive supplementary medical insurance should also be developed to cushion the impact of health shocks on household consumption and balance sheets.

The supply of inclusive services for the elderly and young should be rapidly expanded. Operational subsidies for inclusive childcare providers and parenting support policies should be improved to increase the availability of affordable, high-quality childcare services. Community-based elderly care stations, home-based care beds, and in-home services should also be developed, alongside support for age-friendly renovations. Combining public guarantees with market-based provision can both reduce family caregiving burdens and cultivate new areas of growth in service consumption.

Stabilizing the real estate market and household expectations regarding asset values is equally important. Existing mortgage policies should be appropriately optimized to reduce the extent to which debt servicing crowds out spending on education, culture and tourism, health, and other forms of consumption. The special additional deduction for housing loan interest could also be made more flexible, allowing taxpaying households to claim deductions based on the mortgage interest they actually pay, while appropriately increasing the deductible amount. Such measures would support basic housing needs and reasonable demand for improved housing while reducing household burdens and stabilizing expectations in the real estate market.

In addition, oversight of prepaid consumption should be strengthened. Automatic subscription renewals, preselected options, and unreasonable cancellation practices on online platforms should be better regulated, while cross-regional after-sales service and consumer dispute resolution mechanisms should be improved. This is particularly important because service consumption often requires payment before delivery, making stronger safeguards for payment security and service quality essential to giving consumers greater confidence to spend on services and experiences.

Reducing consumption friction

Service consumption offers substantial room for further consumption growth. High-quality supply should be expanded in culture and tourism, sports, performing arts, domestic services, health and wellness, and childcare. Service standards, credit evaluation, and talent cultivation systems should also be improved. Supply should be tailored to the needs of different family types: Young families need a wider range of cultural, entertainment, sports, outdoor, and short-distance tourism products, while families with young children need greater access to childcare and parent–child services. Elderly households, meanwhile, need more age-friendly goods, health and wellness services, and senior tourism products, while rural households would benefit from improved county- and township-level commerce, logistics, and convenience services.

Efforts should be accelerated to cultivate “AI + consumption,” green consumption, and consumption among older adults, while supporting wider adoption of smart home devices, wearable technology, domestic robots, and home medical equipment. Policies for trading in old consumer goods for new ones should be optimized by bringing smart home products, age-friendly products, and outdoor equipment within the scope of locally administered support programs and streamlining the recycling, dismantling, and replacement chain. Investment in community elderly and childcare facilities, convenient neighborhood living circles, county-level commerce, and cultural tourism infrastructure should be appropriately increased, steering more public investment toward consumption- and livelihood-oriented infrastructure.

Boosting consumption also requires removing unnecessary institutional barriers. Some consumption potential remains unrealized not because demand is lacking, but because population mobility, public access, and the availability of leisure time remain excessively constrained. Public resources such as universities, research institutes, and sports venues should be opened more widely to the public while maintaining safety and order, creating greater scope for sporting events, cultural activities, educational tourism services, and campus cultural and creative products. In this way, public resources can be transformed into new sources of service supply and settings for consumption. At the same time, greater efforts should be made to implement paid annual leave and encourage staggered and flexible leave arrangements, allowing more leisure time to unlock additional consumption potential.

Yin Zhichao is a professor and vice president at the Capital University of Economics and Business.