Prime Highlights:
- China has announced a new plan to increase spending on services, aiming to encourage households to spend more and strengthen domestic demand.
- The government focuses on services like tourism, culture, sports, and education, creating new opportunities for businesses and jobs.
Key Facts:
- Consumer spending on entertainment and social activities reached an eight-year high in late 2025, while demand for big-ticket goods remains below pre-pandemic levels.
- Final consumption accounts for 56.6% of China’s GDP, leaving room to grow services spending compared with over 80% in countries like the U.S. and U.K.
Background:
China has announced a plan to increase spending on services to get households to spend more. Consumers are still cautious because of a weak property market, slow job growth, and uncertain incomes. Trade-in subsidies for cars and appliances have helped, but overall spending is still uneven.
China’s State Council announced that the new plan will focus on expanding services consumption, including cruise and yacht tourism, elder care, sports events, and live performances. The plan also encourages infrastructure upgrades for scenic railways, train stations, and yacht ports, along with measures to attract inbound tourists, such as expanded visa-free access and additional tax-refund points at border crossings.
“Accelerating the development of service consumption and improving the quality and availability of services are central to this plan,” officials said. The initiative also emphasizes innovative approaches to emerging service sectors while maintaining prudent regulation.
Recent data show that Chinese consumers are spending more on experiences and social activities rather than expensive items.
Economists say the service sector employs many people, and growing it could help lower youth unemployment. However, they warn that real growth in consumer spending will depend on raising household incomes and improving social welfare programs.
Ludovic Subran, chief investment officer at Allianz, said that if China could increase the share of household disposable income closer to levels seen in advanced economies, private consumption could rise by around 10 percentage points of GDP.
Right now, consumer spending makes up 56.6% of China’s GDP, compared with over 80% in the U.S. and the U.K., showing there is room for more growth in the service sector.
