China's policy initiatives raise consumer confidence

Editor's note: 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. The article reflects the author's views and not necessarily those of CGTN.

A survey report released by Deutsche Bank on March 18 indicates a significant shift in Chinese consumer sentiment. Nearly 54 percent Chinese respondents said their financial situation has improved, 10 percent more than last year, and expectations of income growth have been rising for two consecutive quarters. This reflects a broader transformation in China's economy, where proactive government policies are gradually restoring consumer trust and driving domestic consumption.

Despite global uncertainties and persistent U.S. trade tariffs, China remains focused on strengthening its economy from within. The growth target of around 5 percent for 2025 emphasizes expanding domestic demand as a fundamental economic priority. This is not just a response to external pressures but a long-term shift toward a more self-sustaining growth model that leans on consumption rather than exports or investment-heavy growth.

For years, China's economic model was largely driven by industrial production and global trade. However, as the global economic landscape evolves, so too has China's approach. Policies aimed at supporting household consumption have become central to the economic planning, recognizing that a confident consumer base is essential for sustained growth.

Tax cuts and consumption vouchers in various cities have encouraged spending, while policies supporting job creation and wage growth have strengthened household financial security. The central bank, the People's Bank of China, has kept interest rates at accommodative levels, ensuring liquidity in the financial system and enabling families to make larger purchases without financial strain. These measures are part of a broader vision to build a consumption-driven economy where individuals feel secure enough to spend rather than save excessively.

China's rapid digital transformation has further fueled this shift. The widespread adoption of e-commerce and mobile payments has made shopping more accessible, particularly in lower-tier cities and rural areas. Whether through "smart retail" experiences or livestream shopping, the integration of technology into commerce has redefined how Chinese consumers engage with the market. This seamless digital ecosystem fosters a culture of convenience and optimism, reinforcing spending habits across demographics.

The impact of these policies is already visible in key economic indicators. Retail sales, a key measure of consumer sentiment, demonstrate consistent growth, with sectors such as automobiles, electronics, and entertainment seeing notable increases. The resurgence of domestic tourism and hospitality underscores a shift in spending behavior, as people feel more comfortable allocating part of their income to travel and leisure activities.

Urbanization and income growth have also played crucial roles in driving domestic demand. As more people move to cities, their purchasing power increases, leading to higher demand for housing, healthcare, and education. These shifts create a cycle where increased consumption fuels further economic activity, ultimately contributing to a more balanced and resilient economy.

Additionally, government efforts to enhance social security and healthcare systems are encouraging families to spend more confidently. With a stronger safety net in place, concerns about future financial instability diminish, allowing consumers to make discretionary purchases rather than focus solely on saving for uncertainties. This marks an essential step in China's transition toward a sustainable, consumption-led economy.

While these domestic policies are taking effect, China is also navigating external economic challenges. The continued imposition of tariffs by the United States poses obstacles to international trade, reinforcing the need for a robust internal market. Rather than relying on external trade as a primary driver of growth, China has embraced its "dual circulation" strategy, which prioritizes domestic economic strength while maintaining selective engagement with international markets.

In this context, technological self-sufficiency has become a key national objective. Investments in sectors such as semiconductors, renewable energy, and high-end manufacturing aim to reduce reliance on foreign technology and create new domestic growth opportunities. These efforts align with broader economic goals, ensuring that consumption is supported by domestic innovation and industrial development.

The real estate sector, historically a major contributor to China's economy, has also seen adjustments. Policymakers have introduced measures to stabilize the market, such as easing restrictions on home purchases and offering financing support for developers. By ensuring stability in housing, a crucial asset for many Chinese families, the government aims to prevent volatility that could undermine household confidence.

As China moves forward, the trajectory of its economy will be increasingly defined by the strength of its consumer base. Disposable incomes are expected to rise, and with improved social welfare systems, individuals will likely feel more empowered to spend. This shift aligns with the government's broader vision of achieving high-quality development that is less dependent on traditional investment-heavy growth models.

In conclusion, China's resilience in the face of global uncertainties is increasingly anchored in its domestic market. The government's strategic policies, ranging from financial incentives to technological advancements, are reinforcing demand-side optimism and shifting the economy toward a more sustainable growth path.

While challenges remain, the country's ability to adapt and invest in its people is ensuring that domestic consumption remains a powerful engine for economic progress. As sentiment grows and spending habits evolve, China is not only weathering external challenges but also shaping a future where its own market becomes the primary driver of long-term prosperity.

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