Firmly Implementing the Strategy of Expanding Domestic Demand

Vigorously implementing the strategy of expanding domestic demand represents a major and well-founded initiative put forward by the Central Committee of the Communist Party of China (CPC) in line with the laws underlying China’s economy and the evolving domestic and international landscapes. It gives weight to both immediate and long-term interests, domestic and international conditions, and development and security imperatives. 

I. Fully understanding the importance of expanding domestic demand

During the 15th Five-Year Plan period (2026-2030), expanding domestic demand on all fronts is vital to China’s efforts to implement the new development philosophy, foster a new development dynamic, and promote high-quality development.

A critical factor in ensuring long-term development and stability

At present, momentous changes of a magnitude not seen in a century are unfolding across the world at a faster pace, and the external environment is growing markedly more complex, grave, and uncertain. The international economic and trade order is facing severe challenges; global economic growth lacks steam; and geopolitical conflicts flare up all too easily and frequently. The World Trade Organization projects global merchandise trade growth of just 0.5% for 2026, well below historical averages. These conditions will make it more difficult for China to maintain stable economic performance. 

Furthermore, as breakthroughs gather pace in the new round of scientific and technological revolution and industrial transformation, all countries are competing fiercely to gain the edge in technology and future development. In artificial intelligence (AI) and other frontier fields, for example, the US and the EU have sharply scaled up investment with the respective launch of the Stargate Project and the InvestAI Initiative. Rivalry among major nations has grown more complex and intense as a result. 

Confronted with such an environment, China must resolutely pursue a strategy of expanding domestic demand. This move will allow it to harness the steady growth of demand at home as a hedge against external demand uncertainties and to steadily strengthen its resilience, competitiveness, development capacity, and sustainability.

A vital avenue for resolving major social challenges 

As the economy has grown and per capita income has risen, the focus of household consumption in China has shifted from meeting subsistence needs to pursuing personal development. It has also expanded from goods to services, with spending on services rising to 46.1% of total per capita spending in 2024. Meeting the demand arising from these consumption upgrades has become a major issue in this era. 

Meanwhile, many weak links remain in China’s development. Industrial and supply chain resilience awaits improvement, and public services in areas such as eldercare, childcare, and medical care are insufficient. As of the end of 2024, registered eldercare institutions in China had around 3.34 million nursing beds, far fewer than needed to serve the much larger number of elderly people with functional or partial functional impairment. Childcare slots for children under three stood at just 4.08 per 1,000 people, and enrollment rates were much lower than the average among OECD countries. Development disparities between urban and rural areas and between different regions also persist. In 2024, per capita disposable income in urban areas was 2.34 times that in rural areas, showing a considerable gap in absolute terms. In addition, there is still much room for improvement in the ecological environment. 

To address these issues, we must focus on boosting domestic demand. We should continue to improve living standards by meeting people’s evolving consumption needs. We should shore up points of weakness by expanding effective investment, striving to advance industrial upgrading, urban-rural integration, balanced regional development, and harmonious coexistence between humanity and nature.

A key focus in boosting domestic economic flows 

China has firmly established itself as the world’s second-largest economy, representing a vast market with unmatched potential. Major economies are invariably driven by domestic demand, and a robust domestic market is a defining advantage of such economies. When domestic demand is insufficient, imbalances arise between supply and demand, resulting in bottlenecks that impede the smooth functioning of the economy. If domestic demand potential can be gradually unleashed, however, supply and demand will interact to good effect, leading to a dynamic balance between the two. This will give rise to an economy that is driven mainly by the domestic market and steadily delivers greater overall efficiency and quality. 

At the same time, by boosting domestic demand, we can also strengthen the links between the domestic and international markets. Attracting global resources and production factors into the national economy will help us create a new development dynamic that is focused on the domestic economy and features positive interplay between domestic and international economic flows. 

China must, therefore, firmly pursue a strategy of expanding domestic demand and work to develop an economic development model in which growth is more driven by domestic demand, propelled by consumption, and sustained by internal momentum. This way, we can keep improving the quality and efficiency of our economy.

An event commemorating the founding of Xiangyang Ancient City Scenic Area is held at the square of Zhaoming Tower in the scenic area, Xiangyang, Hubei Province, May 20, 2025. In recent years, China has expanded its consumer market, optimized its consumption structure, and accelerated efforts to unleash the potential of domestic consumption. PEOPLE’S DAILY / PHOTO BY YANG DONG

A major measure for stimulating market vitality and internal drivers of growth 

Demand and supply are the two ends of the economy—demand drives changes in the supply system and structure, while changes in supply continuously give rise to new demand. The strategy of expanding domestic demand can address the immediate problem of insufficient aggregate demand, while also helping to promote the absorption of supply, spurring supply-side innovation, and providing both impetus and direction for leveraging China’s formidable production capacity.

Meanwhile, deeper supply-side structural reform will help meet upgraded consumer demand while also generating new demand and giving full play to the strengths of our vast market. At present and in the near future, we must strike an effective balance between expanding domestic demand and deepening supply-side structural reform in a bid to create a more desirable dynamic where demand both drives and is created by supply. This will facilitate positive flows in the national economy. 

An important part of furthering comprehensive reform 

A complete domestic demand system is a comprehensive, multi-tiered framework spanning all categories of domestic need. It encompasses the demand system—including consumption and investment—as well as a supply system that is aligned with domestic demand and a market system that optimizes resource allocation and facilitates the flow of commodities and production factors. It incorporates every stage from production and distribution to circulation and consumption. Expanding domestic demand, as we have emphasized, is not just about increasing public expenditure; it also involves setting up effective institutions to provide appropriate guidance for consumption, savings, and investment. 

To build a complete domestic demand system and ensure smooth domestic economic flows, we must take a problem-oriented approach and fully leverage the critical role of reform, eliminating deep-seated systemic barriers through institutional innovation, so as to unlock the full potential of domestic demand. This involves refining institutions to promote consumption, household consumption in particular, advancing reforms in financing and investment systems, accelerating the development of a unified national market, and bolstering the systems underpinning the market economy. All this will enable us to stimulate the intrinsic drivers and vitality of the domestic market.

II. Accurately grasping the new context and requirements for expanding domestic demand

Since the 18th CPC National Congress in 2012, and particularly during the 14th Five-Year Plan period (2021-2025), China has made sustained efforts to expand domestic demand and achieve smooth flows to ensure that supply can meet demand. We have delivered notable results in this regard. In the period ahead, despite facing certain constraints and challenges in expanding domestic demand, China will enjoy a variety of favorable conditions and historic opportunities. On the whole, these favorable factors and opportunities will outweigh any unfavorable elements or challenges.

Domestic demand has gradually emerged as the main engine and anchor of economic growth 

To navigate complex and grave development environments both at home and abroad, the CPC Central Committee and the State Council have in recent years rolled out a series of policies and measures to boost investment and consumption. The Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035), issued in 2022, further clarifies the main objectives, key tasks, and concrete measures for this effort, thus ensuring that consumption and investment continue to play their fundamental roles. Between 2013 and 2024, domestic demand contributed an average of 93.1% to China’s economic growth, with final consumption expenditure and gross capital formation accounting for an average of 55% and 38.1%, respectively. 

On the consumption side, upgrading has accelerated the release of demand potential. As policies and measures, such as the ten major initiatives to promote consumption and drive industrial transformation and upgrading, improvements to consumption systems and institutions, and special campaigns to boost consumption have taken effect, aggregate consumption has continued to expand, and new areas of strong consumer spending have emerged rapidly. In 2024, total retail sales of consumer goods reached 48.3 trillion yuan, 2.4 times the 2012 figure. The share of new energy passenger vehicles in the domestic market surged from less than 0.1% in 2013 to 48.9% in 2024. Consumption in areas such as culture, tourism, sporting events, and healthcare has also surged, with retail sales of services consistently outpacing those of goods. 

On the investment side, structural improvements have accelerated industrial transformation and upgrading. The government has continued to improve its investment mix and its policies to encourage private investment. Over the past two years in particular, we have pursued a top-to-bottom approach integrating “hard investment” in infrastructure and “soft capacity building” to drive high-quality progress on major national strategies and security capacity building in key areas. As a result, a large number of major projects and programs have reached completion at a rapid pace. Investment in scientific and technological innovation has continued to increase. In 2024, China’s total R&D spending exceeded 3.6 trillion yuan, accounting for 2.68% of GDP, higher than the EU average. We have also moved faster to make our manufacturing higher-end, smarter, and more eco-friendly. Between 2018 and 2024, investment in this sector grew at an annual average rate of 6.8%. Investment in green energy has also surged, with a sixfold-plus increase in installed renewable energy capacity in 2024 over the figure of 2012. 

Weak links continue to hinder the development of a complete domestic demand system 

First, internal consumption drivers remain underpowered. Insufficient domestic demand is the principal challenge facing our economy at present. This is clearly evident from the relatively low level of household consumption as a share of GDP. It stood at 39.9% in 2024, 10 to 30 percentage points lower than that in developed countries, with service consumption accounting for a particularly small share. There are two reasons behind this problem. Firstly, due to employment and income growth pressures, the capacity of Chinese residents to spend is constrained. Secondly, restrictions on consumption remain in place in some sectors, and the supply of goods and services is falling short of more diverse consumer needs, making it difficult to effectively unlock consumer demand potential.

Workers operate at the track laying construction site of the Wenling-Yuhuan section of Hangzhou-Taizhou high-speed railway, November 5, 2025. With an impressive bridge-tunnel ratio of 90.34%, the section comprises 13 tunnels totaling approximately 18 km and 17 bridges spanning about 16 km. Once operational, the project will extend railway coverage to all counties in Taizhou, establishing a comprehensive city-wide rail network. PHOTO BY XINHUA REPORTER XU YU

Second, investment momentum has waned. China’s population is aging rapidly, and changes are occurring in the demographic structure and population flows. In some regions, urbanization has transitioned from rapid expansion to a phase of steady development. This shift has made a slowdown in real estate investment growth all but inevitable. In certain manufacturing sectors, low-level redundancy and homogeneous competition are undermining investment. In some localities, traditional infrastructure such as railways and highways is approaching saturation, leading to a decline in investment returns. Additionally, implicit barriers to market access persist in certain fields, dampening investment enthusiasm among private enterprises. Private investment has now declined for two consecutive years and accounts for less than 50% of total fixed-asset investment. 

Third, bottlenecks and obstacles persist in the unified national market. Underlying market institutions and rules require further refinement, and the economic promotion practices of some local governments need to be better regulated. Excessive competition and local protectionism continue to pose challenges. Reforms to promote the market-based allocation of production factors need to be further advanced. Efforts to discover and cultivate new markets for production factors and resources continue to be impeded by institutional shortcomings in areas such as rights confirmation and operational frameworks. Additionally, distribution systems need to be further modernized, and greater efforts are urgently required to develop a first-rate business environment that is market-oriented, law-based, and internationalized. 

Fourth, irrational and disorderly competition is disrupting the market order. Some sectors and enterprises focus excessively on short-term gains, engaging in low-level redundancy competition in existing limited markets. Distorted price signals—for example, offering quality goods and services at excessively low prices or selling low-quality goods and services at inflated prices—disrupt normal market competition, leading to a situation where bad money drives out the good. Such rat race competition has dented producers’ enthusiasm, damaged consumers’ rights and interests, and made it difficult to promote the high-quality development of products, enterprises, and industries.

Enormous space and potential remain for the continued expansion of domestic demand

First, consumption upgrading harbors huge potential for growth. China has a population of over 1.4 billion and a large middle-income group. International experience suggests that when a country’s per capita GDP exceeds US$10,000, the upgrading of household consumption patterns begins to accelerate. Spending on goods like food and clothes falls as a share of total expenditure, while services such as transportation, communications, healthcare, culture, and entertainment claim a growing share. In 2024, China’s per capita GDP surpassed US$13,000. As consumer spending is no longer solely dedicated to basic necessities, discretionary spending for the purposes of personal development and enjoyment is now spreading and upgrading. Meanwhile, high-tech products, digital technology, and AI continue to spawn new forms and models of business and new consumption scenarios. New immersive and experiential consumption scenarios are being nurtured, while e-commerce, the livestreaming economy, and online entertainment are flourishing. All this has created a vast reservoir of potential consumption that will be steadily unleashed in the period to come.

Second, the space for effective investment remains broad. China now stands at a critical juncture in transforming its development model, optimizing the economic structure, and shifting to new growth drivers. To consolidate the foundation for economic and social development will open up extensive space for investment. At present, China’s per capita capital stock is relatively low, and shortcomings are still evident in areas like water conservancy, energy, municipal services, and the development of new types of infrastructure. The potential for investment growth is thus vast. Against this backdrop, coordinated efforts should be made to advance new urbanization and all-around rural revitalization, so as to promote integrated urban-rural development. We should carry out urban renewal projects, build and upgrade underground pipeline networks, and steadily work toward ensuring that basic public services are extended to all urban residents without local household registration, with greater investment in infrastructure and public services. In addition, investment must be continuously increased to address weaknesses in core technologies in key fields. The transformation and upgrading of traditional industries will generate considerable demand for investments in technological advancement, including equipment renewal, process innovation, and digital and intelligent transformation. The development of future industries such as AI, biomedicine, quantum information, and future energy will also continue to provide new momentum for expanding investment. 

Third, the comprehensive green transition will create greater potential for investment and consumption. Green development is the defining feature of Chinese modernization. Guided by the goals of reaching peak carbon emissions and achieving carbon neutrality, we will continue to expand domestic demand through coordinated steps to cut carbon emissions, reduce pollution, pursue green development, and boost economic growth. As the notion of green development is fully embraced by Chinese people, green consumption will rapidly become part of all aspects of daily life. This will help drive fast growth in spending on organic food, energy- and water-saving home appliances, new energy vehicles, and ecological tourism. At the same time, as the green and low carbon energy transformation accelerates across the construction, industry, and transportation sectors, substantial investment opportunities and new areas of investment interest will also emerge.

III. Making solid progress in advancing the strategic task of expanding domestic demand

During the 15th Five-Year Plan period, we must move faster to build a complete domestic demand system. We must see that new demand drives new supply and new supply, in turn, generates fresh demand, thereby fostering positive interplay between consumption and investment and between supply and demand. In doing so, we will enhance both the internal dynamism and reliability of the domestic economy.

Unlocking household consumption potential

First, we must vigorously increase consumers’ willingness to spend. Special initiatives to boost consumption will be fully carried out. We will amplify efforts to stabilize spending on big-ticket items and ensure effective implementation of consumer goods trade-in programs. Through stronger brand development, upgraded standards, and the application of new technologies, we will develop an array of new high-profile consumption scenarios with broad popular appeal. Support will be extended to sectors such as the debut economy, the sporting events economy, and e-commerce. In response to trends in consumption upgrading, population aging, and initiatives to raise birth rates, we will launch a number of key projects to develop facilities for supporting consumption in sectors such as eldercare, childcare, healthcare, culture, and tourism. Urban renewal will be advanced, with a focus on community-level projects that address public needs, such as parking facilities and elevator upgrades in older buildings. We will further expand inbound spending by improving convenience for international visitors. 

Second, we must enhance consumers’ capacity to spend. Our employment-first policy will be bolstered. We will stabilize and expand employment through multiple channels, improve the policy environment to encourage business startups as a means of boosting employment, and provide employment support for key groups. An income growth plan will be put into effect for both urban and rural residents to raise the share of personal income in the national income distribution. We will also give more weight to work remuneration in primary distribution and ensure that personal incomes grow in step with the economy and wages rise in tandem with increases in labor productivity. Inclusive policies that directly benefit consumers will be strengthened, and the government will increase spending on public wellbeing initiatives. We will improve the social security system to ensure more equitable access to basic public services and ramp up childbirth and parenting support.

Creating broader space for effective investment

First, we must better leverage the role of government investment. We will optimize the structure of government investment to increase the proportion allocated to implement public wellbeing initiatives and drive high-quality progress on major national strategies and security capacity building in key areas. Efforts will be made to strengthen integration between “hard investment” in infrastructure and “soft capacity building” in an effort to boost government investment performance. In line with national development needs, we will launch a series of landmark projects in areas such as new energy systems, major water conservancy projects, and key national science and technology infrastructure. Project reserve planning and feasibility review will also be strengthened, and proactive steps will be taken to develop a pipeline of high-quality projects that address development needs, leverage local capacities, and meet public expectations. 

Second, we must do more to stimulate private investment. To this end, we will improve the long-term mechanisms enabling private enterprises to participate in major projects, use government investment funds to guide and catalyze private capital, and provide stronger and more coordinated support concerning funding and other factors for private investment projects, so as to invigorate private investment and raise its share of the total. We will also continue to advance the implementation of new mechanisms for public-private partnership in a well-regulated manner to boost the growth momentum for market-driven effective investment.

Expanding the supply of quality consumer goods and services

We must improve the alignment of supply and demand in consumer goods. We will actively promote the rollout of flexible and customized manufacturing models that allow production to respond efficiently to personalized consumer needs. We will promote the application of AI across all sectors and the value chain of consumer goods and advance the development of data application scenarios. In step with the trend toward green and low-carbon consumption, we will increase the variety of green products and promote their upgrading. Automobile aftermarket spending, including vehicle modifications and RV camping, will also be encouraged, alongside the development of interest-driven products such as pet supplies, animation, and trendy clothes and collectibles. 

In addition, we must enhance both the quality and scale of consumer services. To boost service consumption, we will focus on easing market access and fostering integration between various forms of business. We will step up efforts to develop the silver economy and promote growth in the smart healthcare and eldercare sectors. We will move quickly to improve the eldercare system to ensure integration of home-, community-, and institution-based care and the provision of both medical and health care. The development of community-based childcare, employer-run nurseries, and integrated nursery and childcare services will be encouraged. Online and offline consumption will be further integrated across the commerce, tourism, culture, sports, and healthcare sectors. Support will also be provided for local government efforts to launch more high-quality sporting programs and distinctive athletic events. Meanwhile, steady steps will be taken to further open the service sector.

Advancing the development of a unified national market

Bottlenecks and obstacles impeding the development of a unified national market must be decisively removed. The development of such a national market must be guided by the requirement for “five unifications and one opening up”: unifying underlying market institutions, market infrastructure, standards for government conduct, law enforcement in market regulation, and markets for resources and production factors, while continuing to expand internal and external opening up. In line with these requirements, we will, first and foremost, ensure that the underlying institutions and rules of the market are unified across the nation. We will refine the systems for property rights protection, market access, information disclosure, social credit, mergers and reorganizations, and market exit, and dismantle barriers in fields such as access to production factors, qualification accreditation, public bidding, and government procurement. The economic promotion activities of local governments will be fully regulated, and local protectionism and market segmentation eliminated. We will establish well-aligned distribution rules and standards and pursue higher standards in enhancing market facility connectivity to cut logistics costs throughout society. The statistical, fiscal, tax, and performance evaluation frameworks that support the development of a unified national market will also be refined.

At the same time, we will work harder to address the rat race competition. We must promote better capacity management in key industries and ensure effective implementation of policies and measures designed to resolve structural imbalances, improve quality, and promote upgrading. Predatory pricing and disorderly competition among enterprises will be curbed in accordance with laws and regulations, and unified law enforcement in market regulation will be carried out. We will also redouble law enforcement and judicial administration efforts to tackle monopolies and unfair competition. In doing so, we will create a market order in which good quality commands good prices and healthy competition prevails.

Working faster to improve the institutions and mechanisms for expanding domestic demand

First, we must improve the systems and mechanisms for stimulating consumer spending. We should abolish unreasonable restrictions on the purchase of motor vehicles and housing, while establishing sound regulatory measures suited to consumption in new forms, models, and scenarios. We will work to ensure the implementation of staggered paid leave. Free education will be steadily extended, and systems enabling people to obtain household registration and access basic public services in their place of permanent residence will be rolled out. The layout of infrastructure and public service facilities will be adjusted in line with territorial space planning, demographic shifts, population flows, industrial upgrading trends, and the optimization of service functions. 

Second, we must further the reform of investment and financing systems. Explorative steps will be taken to formulate overall government investment plans in areas where the initial groundwork is in place. We will tackle the tendency in some sectors to prioritize spending over returns and ensure that capital generates greater economic and social value. Pricing mechanisms in sectors such as transport and energy will be refined, and ongoing services and production factor support for investment projects will be strengthened to improve returns. We will also make full use of new policy-backed financial instruments, real estate investment trusts in the infrastructure sector, inclusive lending, and other tools, while refining mechanisms for investment and loan subsidies to spur investment. Reform of the investment review and approval system will be continued. Greater emphasis will be placed on bringing idle and underperforming assets into play, thus driving the optimization of new investments through the revitalization of existing resources.

(Originally appeared in Qiushi Journal, Chinese edition, No. 24, 2025)