China to rebalance growth with domestic demand boost

China is set to prioritize boosting domestic demand in the next five years to address economic imbalances and ensure resilient growth amid external uncertainties, officials and experts said ahead of the annual meetings of the nation's top legislative and political advisory bodies.

As the National People's Congress, China's top legislature, prepares to deliberate the development blueprint for the 15th Five-Year Plan (2026-30) period, they said that intensified macro stimulus to shore up domestic demand as well as bolder steps to strengthen social protection and improve rural residents' income to unlock consumption potential are likely to be high on the agenda.

Sun Xuegong, director-general of the department of policy study and consultation at the Chinese Academy of Macroeconomic Research, said that China is undergoing a phase of upgrading in its industrial base and demand patterns. The transition has inevitably brought challenges such as weak demand relative to supply as industrial capacity matures, he said.

"These are precisely the structural problems the 15th Five-Year Plan will need to address with greater intensity. Overall, China is moving toward a development model in which domestic demand and domestic circulation become more self-sustaining and robust," he added.

Wang Changlin, deputy head of the National Development and Reform Commission, recently called for promoting "an economic development model that is more dominated by domestic demand, stimulated by consumption and characterized by endogenous growth".

He said the focus of macroeconomic policy is placed on "comprehensively expanding domestic demand", reiterating the emphasis on promoting innovation and entrepreneurship to foster new quality productive forces.

Starting in late 2024, China placed more emphasis on driving domestic demand, which boosted expectations in the stock and foreign exchange markets. However, the real economy indicators — such as growth in inflation, retail sales and fixed-asset investment — have remained weak.

Looking at the next five years, Marshall Mills, the International Monetary Fund's senior resident representative in China, recommends more ambitious reforms to decisively boost consumption, such as doubling rural pensions and granting full urban residency rights, or hukou, to China's more than 200 million migrant workers.

According to the staff report based on the IMF's 2025 Article IV Consultation with China, which is its annual assessment of the Chinese economy, the nation's private consumption share in GDP is estimated to have reached 40.1 percent last year.

In economies of the Organization for Economic Cooperation and Development, the median is well above 50 percent by contrast, indicating substantial room for further increase.

Sun, from the Chinese Academy of Macroeconomic Research, emphasized improving the social security system as a key policy lever to strengthen household consumption.

"China has a substantial stock of State-owned assets. How to better integrate these existing assets with efforts to improve livelihood and strengthen social security is an important topic under research and a promising policy direction," he said.

Looking at the near term, Zhang Bin, a member of the National Committee of the Chinese People's Political Consultative Conference, China's top political advisory body, said that strengthening countercyclical adjustments remains most effective in addressing insufficient demand, and suggested "more brave" monetary moves.

More policy rate cuts would lower financing costs for the private sector and increase their return from investments while boosting the valuation of assets and helping repair the balance sheets of enterprises and households, said Zhang, who is also deputy director of the Chinese Academy of Social Sciences' Institute of World Economics and Politics.

Yin Zheng, executive vice-president of China and East Asia operations at French industrial conglomerate Schneider Electric, said that as a "major engine of global growth, China boasts a vast market, a complete industrial system and strong innovation momentum".

These favorable conditions are creating broader development space across industries, Yin said.