Boosting consumption: Cultivating a virtuous cycle to empower new economic growth

Editor's note: Tang Jie is a researcher at the Chinese Academy of International Trade and Economic Cooperation under the Chinese Ministry of Commerce. The views expressed in this article are the author's own and do not necessarily reflect those of CGTN.

Focusing on stabilizing jobs, firms, markets, and expectations is a critical precursor to realizing the goal of consumption-driven, high-quality growth in the 15th Five-Year Plan recommendations. The measures to expand domestic demand and promote consumption, as highlighted by the recommendations and reinforced by the Politburo meeting on December 8, 2025, are designed to create a virtuous cycle that stabilizes expectations, promotes employment, and enhances residents' consumption capacity.

The Politburo meeting signaled a commitment to proactive fiscal policy and appropriately loose monetary policy to stabilize the economy, jobs, markets, and expectations, aiming for a strong start to the 15th Five-Year Plan. This macroeconomic support sets the stage for the consumption-focused reforms to take hold.

Enhancing residents' consumption capacity and promoting employment

The focus on expanding the supply of high-quality consumer goods and services in the 15th Five-Year Plan recommendations—through upgrading standards, strengthening brand leadership, and applying new technologies—drives industrial modernization. This shift towards higher value-added production (eg, in eldercare products, intelligent vehicles, and advanced manufacturing) stimulates new quality productive forces.

The meeting placed "stable employment" at the forefront of the "four stabilities," stressing the need to stabilize and expand employment through multiple channels and optimize the policy environment for promoting employment through entrepreneurship. 

In 2025, the central government allocated 66.74 billion yuan in employment subsidies. The Ministry of Human Resources and Social Security has released 12.24 million jobs in the first half of the year through its job creation and expansion implementation plan, launched subsidies for social organizations to absorb graduates, and increased the amount of loans for stabilizing and expanding employment. Stable employment directly guarantees residents' wage income, which is the main source of residents' consumption power.

At the same time, the government and society take account in the emphasis on high-quality employment and the development of new quality productive forces creates jobs in high-skill, high-wage sectors. This process increases household income and thus residents' consumption capacity, and stabilizes jobs (a key stated goal of the Politburo), further boosting consumer confidence and willingness to spend.

In another aspect, the government relaxing market access in services (telecommunications, healthcare, education, leisure) and integrating business models open up new job-rich sectors. High-quality service consumption, in turn, demands skilled labor, reinforcing the virtuous cycle of high income and high spending.

Stabilizing expectations and promoting consumption

Proactive macroeconomic support — the commitment to a more proactive fiscal and a moderately loose monetary policy (perhaps including potential rate cuts, higher budget deficits, and debt issuance) is a direct signal to the market and consumers that the government is fully engaged in stabilizing growth and avoiding sharp downturns. This boosts consumer confidence and encourages long-term spending rather than precautionary saving.

The Politburo emphasized putting "people's livelihood first" and striving to do more practical things for the people. This aligns with the focus highlighted by the 15th Five-Year Plan recommendations on linking household-centered policies (social safety nets, education, childcare) to growth resilience and confidence. When citizens feel their future is secure, their willingness to spend increases.

Increasing the strength of inclusive policies directly benefiting consumers, such as fiscal measures to unlock consumption potential and increase household income through tax, social security, and transfer-payment measures, directly tackles the core issue of weak consumer demand.

The 15th Five-Year Plan recommendations explicitly proposed "increasing the strength of inclusive policies directly reaching consumers." In 2025, the Ministry of Finance, together with the National Development and Reform Commission, allocated 300 billion yuan of ultra-long special treasury bonds to support the trade-in of old consumer goods, doubling the amount from 2024. The categories of products eligible for subsidies for the trade-in of old home appliances expanded from 8 to 12, and the subsidy standards for new energy vehicles were increased. These inclusive policies were precisely targeted at residents, effectively reducing their financial burden.

And furthermore, China will improve the institutional mechanisms for promoting consumption, eliminate unreasonable restrictive measures on automobiles, housing, and other consumer goods, implement paid staggered leave, and strengthen consumer rights protection. By increasing fiscal investment in basic public services and appropriately raising the proportion of public service expenditure in total fiscal expenditure, we can effectively reduce the burden on residents' lives and future uncertainties, and unleash pent-up consumer demand.

Creating a virtuous cycle: Supply and demand reinforce each other

The fundamental virtuous cycle, as outlined in the 15th Five-Year Plan recommendations, relies on the principle that supply and demand reinforce each other:

Consumption to Investment (Demand to Supply): Increased, higher-quality consumer demand (driven by greater capacity and stabilized expectations) signals to enterprises where to invest. This spurs investment in advanced manufacturing and high-end services (the new supply) required to meet the refined consumption needs.

Investment to Income (Supply to Demand): This new, targeted supply-side investment (and the supportive "proactive" macro policies) creates high-quality jobs and higher wages, which further enhances residents' consumption capacity, closing the loop.

By relaxing market access and promoting business integration to expand service consumption, strengthening brand leadership, upgrading standards, and applying new technologies, China will drive the expansion and upgrading of commodity consumption.

According to data from China's Ministry of Commerce, for 2024, per capita service consumption expenditure accounted for 46.1 percent of total household spending, and it is projected to exceed 50 percent by 2030. We will cultivate international consumption center cities, expand inbound consumption, and build the "Shop in China" brand to fully unleash the market potential of China's more than 1.4 billion people.

In conclusion, by actively stabilizing expectations and increasing income, the government is trying to ensure that its push for supply-side structural reform—creating better, more advanced products—is met by robust and willing demand, leading to sustainable, consumption-led growth.