Analyzing China's Economic Momentum: Is Domestic Demand Losing Steam?

In discussions about China's economic growth, some Western media outlets have claimed that insufficient domestic demand has become a prominent bottleneck affecting China's economic circulation. So, is Chinese consumption truly running out of momentum? To answer this question, it is essential to have a correct understanding of the patterns of industrial development. Simply put, China's economy is transitioning toward a consumption-driven model, with broad growth prospects and strong long-term potential. Currently, China has moved beyond the rapid growth phase of mid-industrialization and is shifting toward high-quality development led primarily by service consumption. This transition follows objective economic laws and represents a significant historical opportunity. New growth drivers centered on service consumption, the experience economy, and technological innovation are filling the void left by weaker growth in real estate and infrastructure construction. China is poised to embark on a remarkable long-term growth trajectory driven by service consumption and dual iterations, where the primary growth engine shifts from investment and exports to consumption. A gradual slowdown in growth rates is a common phenomenon in this process. The U-shaped structure theory of consumption and investment has been repeatedly validated in the industrialization processes of major economies. During mid-industrialization, capital is heavily concentrated in infrastructure, industry, and real estate, squeezing household consumption. As a result, the consumption rate declines with urbanization, forming the left side of the U-shaped curve. Upon entering the late stage of industrialization, capital shifts toward consumption, the crowding-out effect diminishes, and the consumption rate bottoms out and re-enters a growth channel, marking the golden growth period on the right side of the U-shaped curve. Currently, China is at a critical inflection point transitioning from the left to the right side of this curve. Household consumption is accelerating its upgrade from subsistence and material-based needs to development, experience, and service-oriented demands. The proportion of service consumption—such as culture, tourism, health, wellness, sports, home services, and entertainment—continues to rise, becoming a core pillar of economic growth. This transformation does not signify the end of growth but rather a restructuring of growth drivers. From an international perspective, stable consumption-led growth is precisely the key to long-term prosperity. From the 1950s to the 1970s, the United States entered a golden age of consumer economy, achieving a stable growth cycle lasting 30 years. However, during this period, its average annual growth rate was only about 4.3%. This figure indicates that the U.S. had moved beyond high-speed growth, relying instead on the continuous expansion of household consumption for steady economic improvement. During this era, the U.S. also gave rise to numerous world-class service and experience economy brands, such as McDonald's, Wal-Mart, Starbucks, and Walt Disney, building a mature modern service industry system. The emergence of McDonald's was driven by trends such as smaller family structures, faster-paced lifestyles, automobile普及, and a surge in demand for dining out. With the rise of suburbanization, Wal-Mart established itself in small towns with low-cost operations, demonstrating the inevitability of retail chainization and scaling. In the post-industrial era, as consumption shifted toward spiritual and social needs, Starbucks positioned itself around the concept of a "third place," transforming coffee from a beverage into a lifestyle, aligning with the trend of service-oriented consumption upgrades. As a典范 of the rise of entertainment consumption in the late industrialization phase of the U.S., Walt Disney built an experiential empire—from animation to theme park operations—centered on IP, full-chain standardization, and digital empowerment, gradually becoming a benchmark for the integration of standardization and digitalization in the experience economy. Stable growth rates, continuous consumption upgrades, and the development of service brands collectively form the foundation for economic prosperity and improvements in national living standards. Judging from historical experience and economic laws, China's consumption still possesses substantial "long-term momentum." China's current growth range highly aligns with the U.S. golden age of consumption, demonstrating that moderate, stable growth is a typical characteristic of a consumption-driven economy, not a sign of weakening growth. As a later-developing economy, China also possesses unique advantages. While consumption patterns are iterating, China is simultaneously undergoing a digital iteration within its service sector. This represents a dual iteration advancing in parallel. Pattern iteration corresponds to the demand for consumption upgrades. This year's Two Sessions explicitly proposed building Chinese service brands, precisely顺应 this升级 demand, promoting the standardization, branding, and scaling of industries such as catering, retail, culture, tourism, health, and wellness, thereby fostering modern service giants from China. Digital iteration involves using tools like artificial intelligence and big data to empower and enhance efficiency in the consumption transformation. New digital economy infrastructure can reduce transaction costs through digitization, optimize service processes, and precisely match demand, achieving online-offline integration and efficient supply-demand对接. The integration of traditional service industries with digital technology has spawned new business formats and models, enabling service brands to grow faster, cover broader areas, and innovate more deeply than through traditional paths. In summary, the transformation of China's consumer economy is supported by historical patterns and empowered by contemporary technology, offering greater potential and broader space. This is not merely an industrial upgrade but a fundamental shift in the logic of economic growth. The notion of "insufficient momentum" touted by Western media is entirely unfounded.