Building a robust domestic market serves as the strategic foundation for China's modernization. The year 2026 marks the beginning of the 15th Five-Year Plan period. The government work report, submitted for deliberation, prioritizes "focusing on building a strong domestic market" as a key task for the year. It emphasizes adhering to a domestic demand-led approach, coordinating efforts to boost consumption and expand investment, and exploring new avenues for domestic demand growth. How can China more effectively stimulate consumption and investment to make domestic demand the primary engine and stabilizing anchor of the economy?
Policies are being aligned to address the imbalance between strong supply and weak demand. Initiatives include formulating and implementing plans to increase urban and rural residents' incomes, establishing a 100-billion-yuan special fund for fiscal and financial coordination to boost domestic demand, and planning to issue ultra-long-term special treasury bonds totaling 1.3 trillion yuan to continuously support key projects and new initiatives. Multiple arrangements in the government work report target sustained efforts to stimulate domestic demand.
Amid an external environment of increasing uncertainty, the domestic demand-led strategy has become the top priority for China's current economic work. A series of policies aim to resolve the current domestic contradiction of strong supply versus weak demand, forming a practical, efficient, and targeted policy package. Currently, China's economic operation is characterized by a noticeable "strong supply, weak demand" dynamic, with insufficient effective domestic demand, particularly consumption demand, being a prominent weakness.
The government work report proposes "simultaneously stimulating the endogenous motivation for resident consumption and implementing consumption promotion policies," focusing on enabling consumers to spend, making them willing to spend, and giving them the confidence to spend. The draft outline for the 15th Five-Year Plan specifies "coordinating efforts to promote employment, increase incomes, and stabilize expectations, accelerating the formation of a long-term mechanism for expanding resident consumption." The government work report places "deepening the implementation of special actions to boost consumption" in a prominent position, explicitly stating the need to "formulate and implement plans to increase urban and rural residents' incomes." The report outlines practical measures for this year aimed at promoting income growth for low-income groups, increasing residents' property income, and improving salary and social security systems. The fundamental goal is to enhance consumption capacity, allowing consumers to spend.
Currently, overall investment faces increasing downward pressure. The government work report proposes fully tapping into and releasing the potential of effective investment. Plans include allocating 755 billion yuan from the central government budget for investment, directing 800 billion yuan from ultra-long-term special treasury bonds towards key projects, issuing 800 billion yuan in new policy-oriented financial instruments to attract more private capital participation, and allocating 200 billion yuan from ultra-long-term special treasury bonds to support large-scale equipment upgrades. Total government investment funds for the year are expected to exceed 5 trillion yuan, a significant figure when combined with local matching funds. The strategy emphasizes leveraging the guiding role of 109 major projects during the 15th Five-Year Plan period and adhering to the principle of funds following projects.
Expanding domestic demand is a systematic project. To create a favorable environment for investment and entrepreneurship and boost business confidence, macroeconomic policies are being continuously optimized to provide relief and solve difficulties. New local government special bond quotas have been set at 4.4 trillion yuan to support major project construction, hidden debt replacement, and clearing government arrears. An allocation of 177 billion yuan will focus on supporting industrial and employment assistance. Efforts to stabilize the real estate market include strengthening housing support for newlywed and first-time parenting families and accelerating the renovation of dilapidated and old housing. Multiple practical arrangements in the government work report and the budget report aim precisely at stabilizing employment, enterprises, markets, and expectations. Stabilizing expectations is crucial. Policies are transitioning from short-term subsidies to institutional support, using major projects to underpin investment demand and stabilize expectations on one hand, while improving social security and public service provision to boost resident consumption confidence on the other.
Achieving a positive interaction between supply and demand is key to unlocking the space for domestic demand development. The focus is shifting from the goods on the shelf to the consumer experience. Efforts this year will continue in new areas like flagship store economics and new-quality retail, using high-quality supply to stimulate latent demand. By closely integrating efforts to benefit people's livelihoods with promoting consumption, and investing in both physical assets and human capital, new demand can lead new supply, and new supply can create new demand. This fosters a positive interaction between consumption and investment, and between supply and demand, enhancing the endogenous momentum and reliability of the domestic circulation.
Consumption represents the final demand. Catering to the shift in consumer demand from "availability" to "quality," high-quality goods and services can unlock greater consumption potential. This year's government work report proposes allocating 250 billion yuan from ultra-long-term special treasury bonds to support the replacement of consumer goods, and creating a batch of new consumption scenarios with wide impact and high visibility. The plan report specifies policies to promote event economy, e-commerce, "AI + consumption," and IP consumption. Support will be given to the construction of recycling systems for automobiles, electronics, home appliances, and furniture, expanding cultural, sports, and tourism consumption, and regulating online sales and live-streaming commerce. The draft outline for the 15th Five-Year Plan identifies key areas such as unleashing the potential of service consumption and expanding and upgrading goods consumption. These policy arrangements align with new consumer demands, effectively driving employment expansion and industrial upgrading, and promoting a virtuous cycle where "demand牵引supply and supply creates demand."
Investment represents both current demand and future supply. To boost private investment confidence and optimize the investment structure, this year's government work report specifies "increasing the proportion of government investment in livelihood-related areas" and "implementing policies to promote private investment." Both the draft outline for the 15th Five-Year Plan and the government work report emphasize "improving the long-term mechanism for private enterprises to participate in major projects," encouraging and supporting private capital participation in key areas like railways, nuclear power, hydropower, and water supply, and guiding private investment towards new tracks like high technology and modern services. Major strategic tasks during the 15th Five-Year Plan period, such as "building a modern industrial system," "accelerating high-level sci-tech self-reliance and self-improvement," "deepening the construction of Digital China," "accelerating agricultural and rural modernization," and "promoting high-quality population development," will open new investment spaces for all types of businesses. Practical measures like "opening emerging application scenarios to private enterprises" and "leveraging the guiding role of government investment funds" will safeguard and promote private enterprise investment. Private investment is a vital force for activating domestic demand. These measures encourage businesses to invest willingly, confidently, and capably, injecting sustained momentum into building a strong domestic market.
Deepening reform and opening up enhances the driving force for domestic demand development. Addressing bottlenecks that restrict consumption, the government work report proposes measures such as "removing unreasonable restrictions in the consumption sector," "supporting eligible regions in promoting spring and autumn breaks for primary and secondary schools," and "implementing a system for employees to take paid leave during off-peak periods." These policies are practical and targeted, addressing issues like the difficulty for parents to take leave when children are on holiday and challenges in implementing paid leave systems. They focus on resolving people's livelihood pain points, improving the consumption environment, and will prompt local reforms to truly unleash consumption potential.
Continuous reform can provide powerful momentum for smoothing economic circulation, deeply tapping domestic demand potential, and building a strong domestic market. The government work report lists "advancing the development of a unified national market in depth" as a key reform area, with deployments including deepening reforms of the bidding tender system, intensifying efforts to curb "involution-style" competition, and deepening comprehensive pilot reforms for market-based allocation of production factors. Reforms in income distribution, the integrated development of education, science and technology, and talent, and the fiscal and taxation systems will progress steadily during the 15th Five-Year Plan period. These reform measures aim to resolve structural contradictions hindering economic transformation and upgrading, unblock obstructions restricting consumption and investment, and fully stimulate the endogenous motivation of all types of businesses.
Seeking momentum from reform and adding momentum through opening up, high-level opening up is an important pathway for promoting domestic demand expansion and high-quality development. Since its island-wide customs operation commenced, the Hainan Free Trade Port has operated smoothly and orderly, welcoming a new wave of consumption and investment enthusiasm. The Hainan Free Trade Port continues to pioneer institutional opening, introducing global high-quality resources and factors of production, and unleashing the potential of China's vast market. Efforts include creating an open innovation ecology with global competitiveness, optimizing management mechanisms for international professional exchanges and cooperation involving universities, research institutes, and scientific societies, orderly expanding openness in cultural and medical fields, and optimizing the inbound consumption environment to promote "Shopping in China." The draft outline for the 15th Five-Year Plan makes deployments focused on smoothing the domestic-international dual circulation. Advancing high-level opening up can facilitate the convergence of domestic and international market rules, promote the optimal allocation of resources on a broader scale, and use opening up to promote reform, injecting kinetic energy into the strong domestic market and providing more solid and reliable support for China's modernization.
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