China’s economy is struggling due to a combination of factors including a weak consumer confidence level, an extended property downturn, and slowed exports.
The State Council published a plan of work on Thursday to boost service consumption in the next few years. It covers cruise tourism and yachting, elder care, sporting events, culture and education, as well as household services.
Beijing is increasingly aware that the traditional tools of stimulus are less effective at boosting consumer spending.
The shift to services and experiences
According to a cabinet announcement, the work plan aims to “accelerate and cultivate new growth drivers for service consumption,” and to “improve and increase the supply of services.”
The authorities have pledged to promote high-quality consumption of yachts, revamp yacht safety management regulations and upgrade infrastructure*, including docks and public berths.
China’s tourism policy will include a push for self-drive, the promotion of experience-oriented businesses, as well as “tourism-oriented upgrades” to scenic routes and train stations.
To boost travel, the plan calls for the expansion of visa-free entries to more countries as well as adding tax refund points at border crossings.
Sport and live events is another area of focus.
The authorities said that they will increase the number of events of the highest quality, promote the use of international top competitions and encourage high-quality destinations for outdoor sports.
This shift is part of a larger effort to increase the consumption share in China’s economic system, as households are still reluctant to buy expensive goods even though they receive trade-in incentives for appliances and cars.
Beijing’s new strategy
China is redoubling its efforts as it faces persistent internal challenges.
Retail sales will grow 3.7% by 2025. This is behind industrial production growth of 5.9%, and the overall economic expansion rate of 5%.
Last year consumer inflation was unchanged, but producer prices dropped for the third year in a row, continuing a period of deflation that weighed heavily on profits at corporations and wages expectations.
China Beige Book’s early indicators show that services consumption declined sharply in the first month of this year, with travel, chain restaurants, and hospitality all reporting a decline.
Despite the growing concern, the US trade tariffs may have a negative impact on the US economy.
Even though policymakers are encouraged to see that consumer preferences have changed, they still seem to be cautious.
The People’s Bank of China conducted a quarterly survey for the Fourth Quarter of 2025. It showed that the percentage of respondents who planned to spend more on entertainment and social activities in the next three months had reached an 8-year-high, but the interest shown by consumers towards large-ticket items remained below the pre-pandemic level.
Analysts at S&P Global say that emotional satisfaction plays a larger role in the retail sector, as consumers increasingly buy for experiences and self-expression rather than materialistic items or brand recognition.
Finance and Policy Support
Plan of the State Council also contains financial measures that will support this push.
The banks will be encouraged by the government to extend credit to firms that provide services to consumers, while companies offering qualified cultural, educational, sporting, household, or tourism-related products and services can raise money through bonds.
China’s policy objectives are aligned with a more developed service industry.
The consumption of services per capita increased by 46.1% in the last year but is still well below what many developed economies are experiencing, indicating room for further growth.
The services sector is also labor intensive compared to manufacturing, and remains China’s biggest source of employment despite the high youth unemployment rate.
According to China’s census 2020, the tertiary industry accounted for over 48% of job seekers aged 16-24.
Skepticism, and the call for deeper reform
Economists warned that, despite the push for policy reform, boosting only services may not suffice.
Success of the plan will depend on how it addresses deeper structural problems, such as household incomes and welfare.
Ludovic SUBRAN, Allianz’s chief investment officer said that boosting consumption would require “restoring the consumer’s confidence in order to release high savings rates.” This was reported by CNBC.
He said that rebalancing towards domestic demand would also mean “giving time, jobs and income to the consumers.”
Logan Wright, partner of Rhodium Group, said that if the government invested more in social services households would be safer and more willing to spend.
China’s final consumption expenditure will account for 56.6% (up from 49.4%) of its GDP by 2024. This is still below the levels seen in the US and UK.
The economists say it will take many years before gains in service consumption can offset the declines in real estate activity. This suggests that weak demand could continue to affect prices near-term.
Will it be sufficient to have China bet again on service to get consumers to spend? This post may be updated as new information is revealed
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