Market confidence crucial to increase consumption

Editor's note: It was stressed at the Central Economic Work Conference that special initiatives need to be launched to boost consumption. Zhang Yansheng, a researcher at the Chinese Academy of Macroeconomic Research, spoke to National Business Daily about what form these will take. Below are excerpts of the interview. The views don't necessarily represent those of China Daily.

The conference sent the signal that next year's economic work must stay firmly anchored in domestic demand, making its expansion the top priority for the country. China has entered a stage of development where economic growth is outpacing the growth in imports and exports. Against this backdrop, the country's core strategic task is to strengthen the domestic market and ensure greater internal circulation.

The modernization of a major economy must be driven primarily by domestic demand rather than external demand. This is especially true amid the current complex and challenging external environment, where excessive reliance on foreign markets risks intensifying trade frictions. Expanding domestic demand is therefore not a short-term policy choice, but an essential task at this stage of the country's economic development.

Boosting consumption, in particular, should start with meeting people's aspirations for a better life. These needs are concrete and wide-ranging, including better access to education, housing, healthcare and elderly care, as well as higher income. This necessitates the creation of more stable jobs, stronger protection for flexible employment and improved vocational training to enhance labor skills.

In this sense, a growth model led by domestic demand is not only about achieving a macroeconomic balance between supply and demand, but a major policy issue closely tied to people's well-being and the broader goal of national rejuvenation.

To unlock the potential of domestic consumption, China should first establish effective mechanisms for sustained growth in household incomes in both urban and rural areas, alongside a sound social security system. Further reform of the capital and financial markets is also needed so that household savings can translate more efficiently into wealth effects, thereby supporting consumption. Equally important is close attention to consumer confidence and expectations, with the aim of improving the quality of consumption and overall economic welfare.

Some restrictive measures that discourage consumption still exist, including weak consumer rights, unfair treatment of consumers, thresholds for market access and multiple supervision in some areas. Local governments need to accelerate the modernization of governance to make people feel confident enough to spend. Restoring consumer confidence and expectations is particularly critical, as weak consumer sentiment has become a major obstacle to the growth of consumption. Surveys show that some young people, despite having stable jobs and incomes, are reluctant to spend largely because of uncertainty about the future.

Under these circumstances, the government needs to strengthen communication with the market. By conveying an accurate picture of economic conditions and clearly explaining policy intentions and long-term strategies, it can help align expectations across society and gradually rebuild confidence. If information between the government and market participants remains asymmetric, it will undermine confidence and weaken policy effectiveness.

Boosting consumption requires both institutional improvements and more proactive management of consumer confidence and expectations. When these two dimensions reinforce each other, the latent potential of consumption growth can be fully unleashed, providing stronger and more sustainable support for China's economic development.