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Targeted domestic demand policies taking effect

China Daily | Updated: 2026-04-19 20:05
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Editor's note: China's GDP registered 5 percent year-on-year growth in the first quarter of 2026. Its total retail sales of consumer goods grew by 2.4 percent, and service consumption increased rapidly. Su Jian, professor of the School of Economics at Peking University, spoke to National Business Daily about what the data signal. Below are excerpts of the interview. The views don't necessarily represent those of China Daily.

The performance of consumption during the first quarter of this year shows that China's overall economy is recovering, and that consumer confidence is gradually picking up. Going by tax revenue and bank credit figures, China's economy entered a stage of full recovery in 2024. The country introduced a package of policies to boost domestic demand, and these policies are taking effect.

The 5 percent year-on-year GDP growth in the first quarter of this year is 2.6 percentage points higher than the growth rate of the total retail sales of consumer goods.

Yet the fact that the total retail sales of consumer goods registered a 2.4 percent growth rate amid the complex and challenging domestic and international economic environment shows that consumer confidence is on the mend and people's willingness to spend is rising.

Two things can be read from the rapid growth of service consumption in the first quarter. First, people's consumption demand has evolved as household incomes and living standards rise, and they are showing a greater preference for high-quality and service-oriented consumption. Second, by lifting the institutional restrictions on service consumption, China has unleashed a new round of consumption demand.

For example, large-scale soccer events at the local level were rarely heard of in the past. But now, Suchao and Xiangchao, grassroots football leagues launched in Jiangsu and Hunan provinces, have gained huge popularity and helped boost the catering, accommodation and tourism sectors. Their success also shows that service consumption still has considerable room for growth.

That the potential of new forms of consumption is being unlocked shows that consumers are now willing to pursue more diversified consumption experiences.

Such new types of consumption will gradually replace the old ones. Businesses, which are looking for ways to reduce employment costs, should seize this opportunity and reform their operations. New business forms powered by new technologies, such as unattended stores, warehouse clubs and "lights-out factories", are emerging in cities, helping businesses reduce operating costs and expand sales channels.

But the key to boosting consumption capacity lies in increasing household incomes. Stronger willingness to spend requires better consumer expectations.

The most direct way to improve expectations is to strengthen the social security system, such as by further reducing the burden of education and medical expenses on young people.

In addition, it's necessary to formulate scientific and reasonable plans to increase household incomes. This involves two tasks: Growing the pie and then dividing it fairly. To this end, the income distribution system needs to be reformed to reduce the tax burden on enterprises and, through transfer payments and other means, ease the pressure on local governments. A package of policies is also needed to raise household disposable income.

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