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Abstract The report of the 18th National Congress of the Communist Party of China emphasized that "we must firmly grasp the strategic basis for expanding domestic demand and accelerate the establishment of a long-term mechanism to expand consumer demand." This statement highlights the importance of shifting China’s economic development model, placing greater emphasis on consumption as a key driver of growth. By viewing "expanding domestic demand" from a strategic perspective, it becomes clear that this is not just an economic policy but a fundamental approach to ensuring sustainable and balanced development.
The concept of "expanding domestic demand" represents a major theoretical shift in China's economic strategy. It underscores the need to focus on consumer demand rather than relying solely on investment and exports. The report specifically calls for building a long-term mechanism to stimulate consumption, which reflects the core idea that "expanding domestic demand" primarily means "expanding consumer demand."
This transition is essential for transforming the traditional economic model, which has been heavily reliant on investment and export. Over the past three decades, rapid economic growth has led to imbalances, especially after the global financial crisis hit developed economies. As a result, both domestic resources and international markets have become less reliable. Data shows that China's consumption rate is about 30% lower than that of developed countries and 20% below the world average. This gap indicates a strong need to boost consumer demand and unlock new growth potential.
Expanding domestic and consumer demand is also a crucial step in adjusting the economic structure strategically. For years, China has focused on high investment and low consumption, leading to an imbalanced industrial structure with excessive government-led investment and underdeveloped private sector activity. At the same time, household consumption remains limited. By promoting consumer demand, the country can enhance the overall demand structure, support the growth of emerging industries, and drive the modernization of service sectors, particularly in areas like technology and finance. This will help overcome the challenge of insufficient demand and foster a more sustainable and healthy economy.
Furthermore, expanding consumer demand is closely linked to sharing the benefits of development and improving people’s well-being. With per capita GDP reaching $5,414 and Guangdong’s per capita GDP exceeding $7,787, China has entered the stage of middle- and high-income countries. In this context, raising living standards and increasing consumption have become central goals. The 18th National Congress report stressed that by expanding domestic demand and establishing a long-term mechanism for consumer growth, the government can ensure that the people benefit from economic progress and enjoy a better quality of life.
According to global economic experiences and theories, expanding domestic and consumer demand involves unleashing the consumption power of households and boosting 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 dropped to 47.4%. Household consumption fell to 33.8%. These trends highlight the urgent need to reform the income distribution system, raise residents’ incomes, improve social security, implement tax cuts, and enhance public spending efficiency. Such measures will not only strengthen people’s purchasing power but also promote sustained and stable economic growth.
(The author is the director and researcher at the Center for Consumption and Market Research, Guangdong Academy of Social Sciences.)