The simple math behind China's push to boost consumption

If there is one window to understand China's economy, these days it is consumption.

In 2025, China's total retail sales of consumer goods surpassed 50 trillion yuan ($7.25 trillion) for the first time. Consumption contributed 52% to the past year's economic growth, reinforcing its role as a key driver of the economy.

The structure of spending is shifting toward service-based and experience-oriented consumption. Per capita spending on "other goods and services" rose 11.2% year on year, the fastest-growing category. This year's Two Sessions – the gathering of China's top legislature and political advisory body in Beijing – has once again placed people's livelihoods and consumption high on the policy agenda. 

For the past two years, boosting consumption has been listed as the top policy task. This year's Government Work Report tabled in the NPC's opening meeting again highlights special initiatives aimed at stimulating consumer spending. Behind these policy signals lies a broader question: As supply capacity continues to expand, how can demand keep pace?

On March 5, Shen Danyang, director of the State Council Research Office and head of the drafting group for the Government Work Report, offered a simple method to understand the policy approach. At a press briefing held by the State Council Information Office, he described the strategy using four basic mathematical operations: addition, subtraction, multiplication and division.

Together, they outline how policymakers plan to unlock more consumption potential.

Addition: Higher income and more supply

The first step is straightforward – increase both purchasing power and consumer choice.

On the demand side, China has proposed a new income growth plan for urban and rural residents. Measures will focus on raising the income of low-income groups, increasing household property income and improving wage and social security systems. 

On the supply side, policymakers are encouraging new areas of consumption growth. Cultural tourism, automotive after-sales services, sports events, live performances and experience-driven services are among the sectors that are expected to leverage this policy push.

Policies will also support upgrades in lower-tier markets and encourage retail chains to expand into county-level and rural areas, where consumption potential remains significant.

Subtraction: Easing household burdens

If addition expands spending power, subtraction aims to remove the worries that often restrain spending.

This year's policy measures place greater emphasis on reducing household costs in areas such as healthcare, elderly care and childcare. Higher medical insurance subsidies and expanded childcare services are intended to reduce long-term financial pressure on families.

Education and pensions are also part of the effort. One year of free preschool education will continue, with related funding rising by 37.8%. The central government will provide the majority of the financial support.

Meanwhile, the minimum basic pension for urban and rural residents will be raised, benefiting more than 180 million elderly people.

Multiplication: Policy synergy

Multiplication refers to the combined effect of fiscal and financial policies working together.

China will continue expanding its consumer goods trade-in programs, which offer subsidies for replacing old products. Automobiles, refrigerators, washing machines and televisions remain the main categories covered, given their broad consumer base and strong economic spillover effects. New technology products including smart glasses are also being added.

To further amplify the impact, Chinese authorities have introduced a special 100-billion-yuan fund that coordinates fiscal and financial resources to stimulate domestic demand.

Division: Removing barriers

The final step focuses on clearing obstacles that limit consumption.

Policymakers are working to remove hidden barriers in the consumer market. Measures include simplifying approval procedures for promotional events, easing vehicle purchase restrictions in some cities and issuing additional license quotas.

Local governments are also encouraged to allow eligible street-facing shops to set up outdoor stalls – small changes that can help improve market activity and circulation.

Addition, subtraction, multiplication and division are the simplest operations in mathematics. In China's consumption strategy, they form a policy framework: Adding income, subtracting burdens, multiplying policy effects and dividing (and removing) barriers.

As China's economy continues to evolve and consumption patterns shift, this four-step approach provides a useful way to understand how policymakers are trying to unlock the next phase of consumer demand.