China’s consumption problem

(Erik Green, Olivia Parker – IISS) As China’s rate of economic growth slows, the country’s leaders have become increasingly concerned that the economy remains overly dependent on investment- and export-driven growth. Since then-premier Wen Jiabao said in 2007 that China needs to ‘adjust the balance between investment and consumption’, policymakers have repeatedly emphasised the need to boost consumption to fix this imbalance. In December 2025, the Chinese Communist Party’s (CCP) theoretical journal Qiushi published a compilation of remarks made by President Xi Jinping since 2015 on the importance of consumption to China’s economy. The piece declared ‘expanding domestic demand is a strategic move’ and emphasised a decision at last December’s Central Economic Work Conference (CEWC) to make boosting consumption the number one economic priority for 2026. Doing so will support the overall objective of increasing domestic demand. The upcoming 15th Five-Year Plan, due to be announced next month, is, however, unlikely to include either a large-scale stimulus or the structural reforms necessary to significantly rebalance the economy away from investment- and export-driven growth. Efforts to boost consumption will likely remain limited to the ‘investment in people’ concept, which focuses on fixing the problem of precautionary savings as well as additional plans to boost incomes. The Party believes that more significant measures would derail its priority economic objectives: China becoming a world leader in advanced technology, and maintaining internal stability. Despite leaders’ emphasis on boosting consumption, China’s macroeconomic strategy will therefore continue to limit their options for rebalancing the economy, while improving China’s social-safety net is unlikely to significantly grow domestic demand in the short term. – China’s consumption problem