Between late October and early November, the world’s two largest economies each passed through a defining political moment. In Beijing, the Chinese Communist Party’s Fifth Plenum stressed loyalty, discipline, and “self-revolution.” In the United States, the Democrats took back majority control of Congress in the midterm elections, leaving Trump a lame-duck president. In both cases, economic opportunity shaped the outcome, but the two countries’ problems are mirror images. The United States is grappling with renewed inflation, fueled in part by the crisis in the Middle East. China faces the opposite affliction: persistent deflationary pressure and an economy in which households do not spend enough.

For three decades, the Chinese party-state treated household consumption as a by-product of growth rather than as its engine. Nowadays, the Chinese Communist Party (CCP) language has changed on this issue. Last December, the Central Economic Work Conference identified domestic demand as a fundamental driving force of the economy; “letting domestic demand lead” ranked first among the eight tasks for 2026. Similarly, the 15th Five-Year Plan Recommendations made a “marked rise” in the “household consumption rate” a headline goal for the first time. In July 2026, the State Council approved a dedicated plan to expand consumption, targeting retail sales of around 60 trillion yuan ($8.4 trillion) by 2030. The word 消费 (xiāofèi, “consumption”) appeared 20 times in the Five-Year Plan Recommendations and roughly 30 times in the 2026 Government Work Report.

World Bank data shows that Chinese households saved about 42.7 percent of their GDP in 2024, compared with a global average of 26 percent. Gross capital formation absorbed 40.5 percent of GDP, while the household consumption share was just 40 percent, far below the global average of 56.6 percent. For perspective, Chinese households held a record 167 trillion yuan ($25.01 trillion) in bank deposits at the end of 2025, up 9.7 percent from 2024.

For years, property ownership was the primary investment portfolio for the first-generation Chinese middle class, but now the property meltdown has created severe negative effects on the economy. In 2025, real estate development investment fell by 17.2 percent, and new home sales fell by 8.7 percent. Consumer confidence, meanwhile, is very fragile, reflecting deep-seated economic problems in China.  In the People’s Bank of China’s latest published survey of urban depositors, 62.3 percent of respondents said they preferred to save more, while only 19.2 percent preferred to spend more and 18.5 percent to invest more. 

Over the past quarter century, China’s economy has changed more on the production side than on the demand side. In 2000, agriculture accounted for 14.5 percent of GDP, industry and construction for 45.1 percent, and services for 40.4 percent. By 2025, according to the National Bureau of Statistics, the primary sector’s contribution had fallen to 6.7 percent, the secondary sector (manufacturing and construction) to 35.6 percent, and the tertiary sector (services) to 57.7 percent. In the first three quarters of the current year, services accounted for 58.7 percent of GDP and 66.3 percent of growth.

The expenditure side tells a different economic trajectory. Household consumption was 46.8 percent of GDP in 2000 and fell to a low of 34.6 percent in 2010, when investment peaked at 46.1 percent of GDP. In 2024, the average share of consumption to GDP was 40 percent, and investment amounted to 40.5 percent of GDP. Therefore, consumption’s role as a driver of growth has weakened. In 2025, final consumption contributed 2.6 percentage points to China’s 5 percent growth.

These datasets explain why Beijing is pressing harder on services consumption, especially in elderly care, childcare, health, tourism, culture, and sport. Services are already the largest part of the economy and the main source of new jobs, so expanding them absorbs the workers that manufacturing and construction no longer need. However, unlike manufactured goods, services can not be dumped on foreign markets. Growth driven by services consumption therefore does not add to the overcapacity and trade frictions that have put China at odds with its partners.

China’s aging society with a shrinking population will need far more care and health services than it does refrigerators. If the CCP cannot increase demand for goods using trade-in coupons, it hopes to increase demand for services that households need anyway. But achieving that requires the very investment in people that the system has so far been reluctant to make.

In terms of the regional competition to expand consumption, last year Jiangsu, for the first time, overtook Guangdong as the largest consumer market, with retail sales of 4.64 trillion yuan, followed by Zhejiang at 3.92 trillion yuan. In terms of cities, megacity Chongqing replaced Shanghai at the top with 1.67 trillion yuan against 1.66 trillion yuan. Beijing stands third with 1.37 trillion yuan, Chengdu with 1.14 trillion yuan, Guangzhou with 1.10 trillion yuan, and Shenzhen with 1.03 trillion yuan. 

In terms of per-capita spending, Shanghai stood highest at 54,765 yuan, followed by Beijing with 50,667 yuan and Zhejiang at 47,551 yuan, against a national average of 29,476 yuan. Interestingly, generally rich communities or regions contribute more to the consumption cycle, but in China, the richest regions spend the smallest share of their income. For instance, Beijing’s households spend only 56.9 percent of their disposable income, and Shanghai’s 59.5 percent, compared with Tibet’s 72.6 percent. This data shows that families in poor or less-developed regions contribute more to the economy as a share of their income than those in wealthy regions. 

Local governments are competing to raise their consumption share by implementing new measures. For example, in July 2026, Chongqing issued new measures to accelerate its bid to become an international consumption center city. The measures under the program include upgrading its commercial districts and promoting the night-time economy. Chongqing also offered a five-year transition period to convert old factories into elderly care and health facilities. Guangdong credits its subsidies and its Buy Guangdong Quality campaign with generating more than 130 billion yuan in sales. Across 20 provinces, this has resulted in a rise in retail sales in the first half of 2026 of just 4.7 percent.

Despite these central and provincial-level measures, not much has changed in the economic numbers. For most Chinese families, the apartment is the main asset, and its value continues to fall. Development investment fell by 17.2 percent in 2025. Resale prices in third-tier cities were down 5.4 percent year-on-year in September 2026. In the first eight months of 2026, household loans shrank by 1.03 trillion yuan, while deposits grew by 6.99 trillion yuan. Consumption policy has relied on one-off subsidies. Households, however, save against risks that subsidies do not cover, such as old age, illness, unemployment, and their children’s education. The minimum basic pension for rural and urban residents remains below 200 yuan a month. 

To expand consumption, Beijing’s tools have so far been modest. But without cultural changes and broader shifts in social security systems and income structures, it is not easy to expand consumption. Therefore, it is important to make bold structural changes to the income structure of young people, job creation, and the market-driven demand-and-supply mechanism to expand the consumption-driven economy.