According to the State Planner on Tuesday, Chinese authorities will implement new policies to promote domestic consumption and address significant supply-demand imbalances between 2026 and 2030. New policies will focus on the service sector as a priority area.
China has committed to increasing the share of household consumption in its economy substantially over the next five years, although no specific targets have been set.
Wang Changlin, deputy head of the National Development and Reform Commission (NDRC), said at a press conference, “One of the significant challenges facing China’s economy today is the mismatch between relatively high production capacity and actual low levels of consumer expenditure”.
Last year, China’s GDP grew at 5%, precisely meeting the official target set by government officials; this growth was primarily driven by a surge in Chinese exports due to demand from overseas markets, offsetting the weakness in the internal marketplace. Achieving a similar result is going to be much harder than it has been in the past.
The increase in industrial output (5.9%) outpaced the increase in retail sales (3.7%) for 2025. As a result, there was a sustained increase in supply without a matching increase in demand.
On Tuesday, the Chinese Finance Ministry announced that it would continue to provide interest subsidies to consumers, service-sector businesses, and companies upgrading equipment to the end of 2026. The goal of this action is to increase domestic demand and stimulate household consumption.
This year, the Ministry of Finance will provide a two-year interest subsidy for loans made to micro- and small-sized enterprises with less than 500 employees. This is in addition to a total of 500 billion yuan ($71.83 billion) worth of guarantees for private investment. Zhou Chen, an NDRC official, advised that they will still use trade-in subsidies to increase consumer purchases of electric vehicles, but that they have shifted their emphasis to the service sector.
According to Zhou, they believe the service sector has more potential for continued growth than the manufacturing or goods-producing sectors, as service industries (e.g., healthcare, leisure, and elderly care) stand to benefit significantly from the expansion of the service sector.
In December, China began using 62.5 billion yuan ($8.98 billion) of treasury bonds to finance its Consumer Trades-in Scheme for appliances and clean energy vehicles through 2026. ($1 = 6.9606 yuan).
