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China has announced a plan to revitalise domestic consumption as President Xi Jinping’s government battles to reverse weak confidence and deflationary pressures in the world’s second-largest economy.
The government will “vigorously boost consumption” and “expand domestic demand in all directions”, according to Xinhua, China’s state news agency, echoing Xi’s exhortation late last year for policymakers to shift towards supporting demand following a sustained push to boost industry.
The plan from the state council, China’s cabinet, will focus on raising incomes, stabilising the real estate and stock markets, and improving medical and pension services, though policymakers provided few details of fiscal expenditure at a briefing in Beijing on Monday afternoon.
The briefing largely repeated figures published in the annual budget last week during the “two sessions” meetings, where lawmakers reasserted consumption as a top priority.
Hong Kong’s Hang Seng index rose 0.8 per cent, while futures for Brent crude, the international oil benchmark, climbed 0.6 per cent to $71 a barrel. Mainland China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks, which on Friday turned positive for the year to date in anticipation of the consumption briefing on Monday, closed down 0.2 per cent.
Domestic spending in China has been weak since the end of Covid-19 lockdowns more than two years ago as households exercised caution over expenditure. Consumer prices fell into deflation in February, though the reading was affected by the lunar new year holiday.
A slowdown in China’s vast property sector, partly driven by an official deleveraging drive and now into its fourth year, has also re-energised calls from economists to strengthen domestic demand.
National Bureau of Statistics data on Monday showed retail sales rose 4 per cent in January and February on the year before, beating a 3.7 per cent increase in December and in line with forecasts from a Reuters poll of analysts. Average new home prices declined on a month-on-month basis.
Policymakers last September unveiled a long-awaited package to support the economy, but the measures largely focused on stock markets.
The new consumption plan includes pledges to increase the minimum wage, strengthen support for education and establish a subsidy system for childcare, a pressing issue as China’s population has declined for three consecutive years.
Lynn Song, ING chief economist for greater China, said the plan put “considerable focus on increasing both the capacity and willingness of households to consume” and could “help China’s economic transition towards a consumption-driven growth model”.
Data released on Monday also showed industrial output grew 5.9 per cent year on year in the first two months of 2025, slowing from 6.2 per cent in December but beating analysts’ expectations of a 5.3 per cent rise.
The new package will also promote “inbound” consumption. Beijing has extended visa-free travel to dozens of countries in the past year in an effort to revive foreign tourism after the pandemic.
It also highlighted sectors such as “snow and ice”. China has built several indoor ski resorts in recent years, including the world’s largest in Shanghai, which opened in September.
Xu Chenggang, senior research scholar at Stanford University’s Center on China’s Economy and Institutions, said Beijing’s pivot to consumption betrayed an official recognition that the economic situation was “severe”.
But policymakers were still struggling to take concrete steps to stimulate demand, he added.
“If we look at the publicly announced policy measures . . . we still don’t see much there in terms of supporting domestic demand,” Xu said. “Although on the one hand they admit that something is wrong . . . they are still emphasising more on the supply side.”
Additional reporting by William Sandlund in Hong Kong
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