MNI POLICY: China Targets Investment To Boost Consumption

Chinese officials will aim to raise the household consumption-to-GDP ratio by an average of one percentage point per year over the next five years from the current 39.9% towards the 50-70% range typical of developed economies, using a combination of consumption-related infrastructure spending, services subsidies and wage-growth support, MNI understands.

While authorities have designated consumption as a core pillar of economic growth, officials acknowledge that the low consumption-to-GDP ratio is insufficient to meet short-term targets. As a result, a new package of measures will be rolled out from 2026 to strengthen what they describe as a “virtuous cycle” between investment and consumption.

Officials cite recent developments, such as the rapid expansion of charging infrastructure which has boosted electric vehicle demand and increased spending on highways and tourism facilities that stimulated travel flows, as evidence that targeted investment can effectively drive consumption upgrades. Beijing now intends to replicate these dynamics across additional sectors, stepping up support for projects in elderly care, childcare, culture, tourism and sport.

According to the National Bureau of Statistics, investment accounted for just 16.8% of China’s economic growth in the first half of 2025, far below the 52% contribution from consumption and the 31.2% from net exports. Officials view the record-low investment contribution as a key factor behind persistently weak domestic demand. (See MNI: Tourism, Coupons Eyed To Boost China's Consumption)

Infrastructure investment in national logistics hubs and bases will also be needed to boost consumption, as improvements will reduce logistic costs and create favourable conditions for household purchases, with officials noting potential gains at a local level, including temperature-controlled and last-mile delivery.

Beijing also wants to encourage greater car ownership. Although China represented the world’s largest automobile market in 2024, with sales reaching 31.4 million units, the country still has fewer than 260 vehicles per 1,000 people – well below the 600-800 typical of developed economies – leaving significant room for growth.

SERVICES & HOUSEHOLDS

Authorities expect the next phase of China’s consumption strategy to focus more on the services sector, as recent data show service demand growing roughly one percentage point faster than goods consumption. New policies will encourage higher spending on services, with a particular focus on building strong support systems for the elderly and for childcare. (See MNI: China's Fiscal Expansion Needs Decrease As 5% GDP Eyed)

Boosting household income while reducing financial pressure also represents a core pillar of the government’s consumption strategy. Officials stress the need to refine minimum-wage adjustment mechanisms, ensure steady and reasonable growth in labour income, and implement policies to stabilise capital markets. 

Authorities also intend to remove barriers restricting long-term capital from financial markets, expand the range of investment products available to individuals, and widen channels through which households can increase wealth, such as that from capital markets. By reducing the costs and uncertainties associated with essential services such as childcare, education, healthcare and geriatric care, the government aims to alleviate the “concerns behind consumption,” strengthen public confidence, and foster an environment more conducive to sustained consumer spending.