Dedicated plan aims to up consumption

China has unveiled its first-ever national-level five-year plan specifically dedicated to expanding consumption, setting a target of 60 trillion yuan ($8.3 trillion) in total retail sales of consumer goods by 2030 as a major part of the push to rebalance the economy toward domestic demand-driven growth.

On July 13, the State Council, China's Cabinet, approved the plan for expanding consumption during the 15th Five-Year Plan (2026-30) period, placing greater emphasis on boosting services consumption and enhancing household income and social security.

China's retail sales surpassed 50.1 trillion yuan in 2025, authorities from the National Development and Reform Commission and the Ministry of Commerce said when elaborating on the plan.

During the 14th Five-Year Plan (2021-25) period, consumption expenditure contributed an average of 58.8 percent to economic growth, 10 percentage points higher than the previous five-year period, they added.

However, authorities acknowledged that the consumption sector still faces challenges, which objectively constrain the further unleashing of consumption potential.

The latest plan marks a major shift in how policymakers approach consumption. Rather than treating it as a short-term tool, the plan positions consumption as a core pillar of China's medium — to long-term development strategy, according to Teng Tai, director of the WANB New Economy Institute, a Beijing-based think tank.

"Expanding consumption is not simply about stimulating terminal demand — it is a systemic transformation covering income and structure, demand and supply," Teng said, adding that the 60-trillion-yuan target is "pragmatic and prudent", leaving room for potential economic fluctuations.

The plan implies an average annual real growth rate of about 4 percent in retail sales over the next five years, a figure economists say reflects realistic expectations given the current economic environment.

The plan's 28 measures are organized around six strategic pillars: upgrading service consumption, expanding goods consumption, creating new consumption scenarios and business models, enhancing household spending capacity, optimizing the consumption environment, and strengthening institutional mechanisms.

At the top of the list is service consumption, a category that, according to the National Bureau of Statistics, accounted for 46.1 percent of household spending last year and is seen as the next frontier for consumption growth.

The plan calls for expanded access to elderly care, childcare, cultural tourism and health services, reflecting the government's recognition that China's aging population and changing consumer preferences demand a reorientation of supply.

New consumption hot spots are rapidly emerging across China, and service retail sales growth has consistently outpaced goods retail, making service consumption the main driver of consumption growth, said Dong Yu, executive vice-president of Tsinghua University's China Institute for Development Planning.

"This deployment will strongly propel China's service consumption into a more diversified, integrated and quality-oriented development stage," Dong said. "It will better meet the demand for high-quality living while promoting high-quality and efficient development of the service sector, injecting new momentum and vitality into economic growth."

The plan also specifically addresses new business formats and models, including digital consumption, green consumption, the debut economy, experiential consumption and inbound consumption. The plan includes the further expansion of visa-free entry, increased direct international flights, specifically to Europe, the United States and countries involved in the Belt and Road Initiative, and an overhaul of payment and tax-refund systems to remove friction for foreign tourists.

Chen Lifen, a researcher at the Development Research Center of the State Council, said that with a population of over 1.4 billion and a middle-income group exceeding 400 million, China's consumption upgrading space remains immense.

Against a backdrop of rising external uncertainties and slowing growth in traditional goods consumption, cultivating new business formats, models and scenarios as consumption growth points is essential to converting potential market space into actual market scale, Chen said.

"This can continuously expand consumption growth and help the economy navigate challenges with steady progress," Chen added.

The plan devotes significant attention to household income and social security — the foundational drivers of consumption. It calls for raising minimum wages, expanding individual income tax deductions, and increasing pension and healthcare protection to put more money in people's pockets.

Wen Bin, chief economist at China Minsheng Bank, said the key is the "substantive implementation" of the urban and rural resident income growth plan, which was outlined in this year's Government Work Report as a priority.

"People need to have money in their hands and confidence in their future," Wen said, adding that improving the social safety net will help reduce precautionary saving and encourage households to spend.

The plan also embraces the role of technology in reshaping consumption. It explicitly calls for deepening "AI plus consumption" integration, supporting the development of debut economy events, and cultivating immersive, experience-driven consumption scenarios.

"Digital technologies such as AI, the Internet of Things and virtual reality are not only generating new products and services like smart wearables and instant retail, but are fundamentally reshaping consumption scenes and interaction patterns," said Fu Yifu, a researcher at Jiangsu Su Merchants Bank.

According to a report on changing consumer behavior released last October by US media services company Omnicom Media Group, 65 percent of consumers now expect to find the answers they are looking for in artificial intelligence overviews.

"We clearly observe this trend through monitoring click streams, sessions and conversations on our platform," said Diarmuid Gill, chief technology officer of global commerce media company Criteo, noting that the application of AI is currently focused on the product discovery and price comparison stages, with the final consumer decision-making phase remaining underdeveloped.

As AI has become an important part of the consumer shopping journey, businesses need to deploy AI agent-driven marketing strategies promptly to capitalize on this critical growth opportunity, Gill added.

wangkeju@chinadaily.com.cn