Can China's bold plan supercharge spending and reshape its economy?

By Matteo Giovannini

The recent unveiling of a strategic plan to bolster domestic consumption marks a pivotal moment in China's economic agenda for 2025. Amid global uncertainties and fluctuations in external demand, prioritizing domestic consumption and expanding internal demand are imperative for sustaining high-quality growth. Reinforcing this direction, economic data from the National Bureau of Statistics, released at a press conference held by the State Council Information Office underscores the economy's positive momentum, validating the effectiveness of these policies.

The plan aims to enhance consumer confidence, strengthen purchasing power and stimulate innovation, fostering a self-sustaining cycle of economic growth and improved livelihoods. Historically, China's economy has been driven by investment and exports, but in recent years, domestic consumption has emerged as a key growth driver.

Recognizing this shift, the government has introduced measures to boost household income, stabilize employment and reinforce social security, all of which are essential for encouraging consumer spending. However, as consumer behavior evolves, policies must not only stimulate short-term demand but also lay the groundwork for a sustainable andconsumption-driven economy.

A central component of the new plan emphasizes wage growth and expanded employment opportunities. A robust job market not only increases household income but also provides a stable foundation for long-term consumption growth. Policies such as raising the minimum wage adjustments and offering income support for low- and middle-income groups aim to enhance spending capacity. Furthermore, efforts to stabilize the stock market and develop new financial products will expand household wealth and reinforce financial security, allowing for greater discretionary spending.

Addressing high living costs, particularly in housing, education and healthcare, is also integral to the plan. By expanding affordable housing programs, increasing fiscal subsidies for healthcare and improving childcare services, the government seeks to alleviate financial burdens on households, freeing up more income for broader consumption.

Additionally, promoting tourism and cultural consumption is expected to drive internal demand, as increased investment in entertainment, leisure and domestic travel generates both economic expansion and employment opportunities.

Encouraging consumption alone is not enough; supply must adapt to meet shifting consumer preferences. The government's strategy includes fostering innovation in key industries such as autonomous driving, smart wearables, robotics and 3D printing. By nurturing these sectors, China is not only creating new growth drivers but also ensuring that supply keeps pace with demand, enhancing market efficiency. Strengthening urban-rural integration and logistics networks will also be critical to ensuring that goods and services reach consumers seamlessly across the country.

Beyond technological innovation, the plan promotes green consumption and sustainable development. Policies supporting renewable energy, energy-efficient appliances, and electric vehicles align with China's broader goal of achieving carbon neutrality while simultaneously creating new market opportunities.

Furthermore, investments in digital infrastructure and the expansion of e-commerce will further stimulate online consumption, which grew by 7.3 percent year-on-year in early 2025, reaching 2.28 trillion Chinese yuan ($315 billion). Facilitating greater participation of small-and medium-sized enterprises in the digital economy will further bolster domestic consumption and innovation.

Economic data from January and February 2025 indicate steady recovery and resilience. Retail sales grew by 4.0 percent year-on-year, reaching 8.37 trillion yuan, a 0.5 percentage point increase from last year. Industrial output of major enterprises rose by 5.9 percent, slightly outpacing 2024's full-year growth rate, while fixed asset investment increased by 4.1 percent to 5.26 trillion yuan. These figures reflect strong consumer and industrial activity, reinforcing confidence in China's around 5 percent GDP growth target for the year.

To ensure economic growth translates into tangible improvements in people's well-being, China must refine social policies and economic reforms that strengthen the connection between development and livelihoods. Expanding subsidies for healthcare, pensions and unemployment benefits can ease household financial stress, enabling higher consumer spending. Improving rural development policies and investing in infrastructure in underdeveloped regions will help bridge economic disparities and expand domestic demand.

China is also addressing demographic challenges by supporting family-oriented policies. Expanding childcare subsidies and parental leave benefits will encourage birth rates and promote work-life balance, indirectly boosting productivity and economic stability. Moreover, increasing investments in education, particularly in rural areas, will help cultivate a more skilled workforce, enhancing the country's long-term economic resilience.

China's focus on boosting domestic consumption and expanding demand is a well-calibrated strategy for navigating today's economic landscape. By implementing policies that increase disposable income, foster innovation and improve social welfare, the country is building a resilient economic model that prioritizes both stability and long-term growth.

Moving forward, ensuring policy consistency and addressing structural challenges will be key to maintaining economic momentum. Strengthening public trust in economic policies, deepening financial reforms and fostering an entrepreneurial ecosystem will unlock the full potential of domestic consumption. Encouraging private sector participation and reducing bureaucratic hurdles for businesses will further support sustainable economic expansion.

Ultimately, the success of these efforts will be measured not just by GDP growth but by how effectively economic progress improves people's lives. By fostering a cycle where economic expansion leads to higher incomes, greater security and increased spending, China can ensure its development remains sustainable and inclusive. The interplay between economic policies and improvements in living standards will define China's path to long-term prosperity, reinforcing its position as a stable and thriving global economy.

Matteo Giovannini, a special commentator on current affairs for CGTN, is a finance professional at the Industrial and Commercial Bank of China, a Non-Resident Associate Fellow at the Center for China and Globalization and a member of the Global Young Leaders Dialogue.