China is ramping up efforts to boost consumer spending with a mix of income policies and fiscal incentives, as policymakers look to strengthen domestic demand as a key driver of economic growth.

Expanding domestic demand has been placed at the top of the government's policy agenda for the second straight year, according to this year's Government Work Report, which highlights a special action plan aimed at stimulating consumption.

For the first time, the report proposes an income growth plan for urban and rural residents. The measures include boosting earnings for low-income groups, increasing property income and improving wage and social security systems, to strengthen household purchasing power.

Officials see income growth as central to sustaining consumption. China's per capita disposable income reached 43,377 yuan ($6,274) in 2025, up 5% from a year earlier.

Consumer spending has continued to expand. Retail sales of consumer goods rose 3.7% in 2025 to 50.1 trillion yuan (around $7.25 trillion), surpassing the 50 trillion yuan mark for the first time. Consumption contributed 52% of China's economic growth.

Zhang Linshan, a researcher at the Macroeconomic Research Institute under the National Development and Reform Commission (NDRC), said this year's policy framework combines short-term support with longer-term structural reforms.

Unlike earlier stimulus efforts focused on short-term spending support, this year's policy framework combines near-term stabilization measures with longer-term institutional reforms, Zhang said. The new income growth plan for urban and rural residents aims to strengthen the foundation for sustained domestic demand.

China is also expanding fiscal support to encourage spending on consumer goods. 

Authorities will allocate 250 billion yuan in ultra-long special treasury bonds this year to support the country's consumer goods trade-in program, which subsidizes purchases when households replace old appliances and vehicles. And the country will also set up a special fiscal-financial coordination fund of 100 billion yuan to support domestic demand.

Zou Yunhan, deputy director of macroeconomic research at the NDRC's State Information Center, said the program would help bring more high-quality manufactured products into households by encouraging consumers to replace old goods.

Early results are already visible. In 2025, retail sales at major retailers of home appliances, communication equipment and furniture rose 11%, 20.9% and 14.6%, respectively, driven partly by the trade-in program. Passenger vehicle retail sales increased by 3.8%.

Authorities are also targeting services consumption, an increasingly important driver of spending. The government plans to create new consumption scenarios and expand high-quality services.

Measures to expand leisure time are also being explored, including encouraging some regions to introduce spring and autumn school holidays and implementing staggered paid leave for workers to boost tourism and cultural spending.

China's vast domestic market offers significant room for growth. As incomes gradually rise and policy support continues, stronger household spending is expected to play a larger role in sustaining economic momentum in the coming years.

(Cover via VCG)