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Expanding domestic demand and, more specifically, consumer demand, are crucial steps in transforming China’s economic growth model. Over the past three decades, rapid reforms and opening-up have propelled China’s economy forward, but the global financial crisis has led to an economic slowdown in developed countries, making the previous reliance on investment and export increasingly unsustainable. Statistics show that China's consumption rate is approximately 30% lower than that of developed nations and about 20% below the global average. This gap highlights the urgent need to shift focus toward boosting consumer demand, which can unlock vast potential for sustained economic growth.
These strategies also play a key role in adjusting China’s economic structure strategically. For a long time, the country has relied heavily on investment while neglecting consumption, leading to an imbalanced industrial structure dominated by government-led investment and infrastructure projects. Meanwhile, private investment and consumer demand remain constrained. By prioritizing consumer demand, China can enhance the overall demand structure, support the development of emerging industries, accelerate the growth of modern service sectors, and drive the transformation of traditional industries. This will help overcome the challenge of insufficient overall demand and ensure a healthier, more sustainable economic path.
Expanding domestic and consumer demand is also a vital part of sharing the benefits of development and improving people's well-being. With per capita GDP reaching $5,414 and Guangdong’s per capita GDP surpassing $7,787—placing it at the level of middle- and high-income regions—China is now at a stage where improving living standards and promoting consumption has become a top priority. The 18th National Congress report highlighted the importance of expanding domestic demand and establishing a long-term mechanism to sustain consumer demand, paving the way for the public to enjoy the fruits of economic progress.
Based on global experiences and economic theories, expanding domestic and consumer demand mainly involves enhancing residents' purchasing power and raising the consumption rate. Since 2010, China’s investment rate has surpassed its consumption rate for the first time, reaching 48.6%, while the consumption rate fell to 47.4%, and household consumption dropped to 33.8%. This imbalance underscores the need for deeper reforms in the income distribution system, focusing on increasing residents’ incomes, improving social security, implementing tax cuts and profit-sharing policies, and refining public revenue and expenditure mechanisms. These measures will not only boost people’s consumption capacity and quality of life but also drive stable and long-term economic growth.
(The author is the director and researcher of the Center for Consumption and Market Research at the Guangdong Academy of Social Sciences.)
Abstract The report of the 18th National Congress of the Communist Party of China emphasized: "We must firmly grasp the strategic foundation for expanding domestic demand and accelerate the establishment of a long-term mechanism to boost consumer demand." From the perspective of this "strategic foundation," it is essential to understand the core and critical elements that underpin this policy. "Expanding domestic demand" represents a significant theoretical innovation, with the main focus being on increasing consumer demand. The call for a long-term mechanism to expand consumer demand reflects the central idea that economic development should be driven more by consumption rather than investment and exports.