Editor's note: Li Lintong, a special commentator for CGTN, is an assistant professor of economics at the National School of Development, Peking University. The article reflects the author's views and not necessarily those of CGTN.

China's September and third-quarter data provide further evidence of stable economic growth. Real GDP increased by 4.6% in the first nine months. Industrial production expanded relatively quickly, with value added at industrial enterprises above the designated size rising 5.5% year on year in September. Fixed-asset investment increased 0.07% month on month after six consecutive monthly declines, an encouraging sign of stabilization. Employment remained broadly stable: The surveyed urban unemployment rate was 5.2% in September, down 0.1 % from August. These indicators give strong grounds for confidence that China can meet its annual growth target of 4.5% to 5%.

This pace of growth remains comparatively high among major economies, yet some households report little improvement in their own economic circumstances. For many people, the consumer market provides the most immediate measure of economic conditions. Retail sales of consumer goods increased only 1.1% in the first nine months, an important reason why growth feels less apparent in everyday life. Why does this gap between macroeconomic performance and personal experience arise? Where does the income generated by growth go, and how will its benefits ultimately reach households?

The explanation begins with the transition from traditional to new sources of growth. High-tech manufacturing and foreign trade are providing strong momentum: High-tech value added manufacturing rose 14.3% in the first three quarters, while goods exports increased 16.4% in nominal terms. Advanced manufacturing is often capital-intensive, generating relatively few direct jobs per unit of output. Automation can substitute machinery for labor in routine tasks, allowing production to expand faster than employment. Some of the resulting income accrues as corporate earnings and finances further research and equipment, rather than immediately becoming household disposable income.

On the consumption side, technological progress benefits households primarily by lowering product prices. Productivity improvements and technology diffusion reduce production costs, making goods such as smart home appliances and new energy vehicles more affordable. Yet people may judge their economic circumstances mainly by changes in nominal income, such as their monthly salary. Gains in real income through lower prices can be less apparent. As these products become cheaper, the same earnings buy more of them. A focus on nominal earnings may therefore lead households to underestimate the improvements in purchasing power and welfare made possible by technological progress.

A second channel is the creation of better-paid jobs across supply chains. As new industries expand, they generate demand for skilled workers in specialized manufacturing and related services. Industrial upgrading therefore offers the prospect of better employment and higher incomes, but these gains take time to spread. Suppliers must adapt their production capabilities, new business relationships must develop, and workers need to acquire relevant skills. The broader employment benefits emerge gradually as supply chains adjust and new industries become more established.

Electric vehicles provide a clear example of how industrial upgrading makes consumer goods more affordable. According to the National Bureau of Statistics, prices of new energy cars fell 6.6% in 2024 and a further 3.1% in 2025; conventional-car prices declined by 5.8% and 3.5% respectively. Lower battery costs and economies of scale have helped make electric vehicles cheaper, while competition from these models has encouraged conventional manufacturers to offer lower prices. Consumers benefit whether they buy an electric or a conventional car.

Innovative medicines show why institutions also matter. Research can produce more effective treatments, but insurance coverage and price negotiation help make them affordable. China's 2025 national medical insurance drug list added 114 medicines. The National Healthcare Security Administration also reports that the interval between the launch of innovative medicines and their inclusion in insurance coverage has shortened. The welfare gain becomes tangible when patients can obtain treatment with a smaller financial burden.

Policies that support household income growth and more predictable earnings can help translate industrial progress into improvements in daily life. Taxes, transfers and public services can spread productivity gains more widely, with particular benefits for lower- and middle-income families. Greater purchasing power should allow more households to afford the electric vehicles and other advanced products made by Chinese firms, bringing domestic demand into closer alignment with the expansion of these industries.

A stable labor market also gives households greater confidence about the future. Fiscal and monetary support for demand can help sustain employment, while retraining, job-matching services and unemployment protection ease the adjustment to changing technologies. Reliable support during job transitions can give workers greater confidence that technological progress will bring better opportunities, even when the benefits take time to emerge.

China's industrial upgrading provides a durable basis for higher living standards. The policy task is to make its benefits reach a wider population through better employment, stronger household incomes and affordable products. Public perceptions of the economy will improve as these changes become more evident in daily life. Strengthening household demand should, in turn, give innovative firms a larger domestic market and make economic growth more self-sustaining.

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