China is actively seeking the next wave of ‘big items’ to encourage consumers to increase their spending. Technology appears to be a primary area of focus.
China’s New Initiative to Boost Spending
Last Sunday, China released a new action plan designed to stimulate consumer spending. The immediate question on many observers’ minds is whether this ‘spend, spend, spend’ initiative will be successful.
Historically, China has employed strategies to boost domestic spending since the late 1990s, when the country began producing more goods than could be consumed or exported.
Two main schools of thought have emerged on how to achieve increased spending:
Demand-Side Strategies
The first approach focuses on the demand side, arguing that as people’s incomes rise, their spending naturally increases. Proponents of this approach advocate for a steady rise in both household incomes and equitable national income distribution. During the annual parliamentary gathering in March, there were numerous proposals for cutting personal income tax.
Supply-Side Initiatives
The second perspective emphasizes the supply side of consumer spending. This view suggests that the average disposable income of Chinese residents has already been increasing alongside economic growth. According to official data, per capita disposable income in China grew by 5.3 percent in 2024, aligning with a 5 percent growth in gross domestic product.
This viewpoint posits that Chinese households already possess adequate spending power. Therefore, stimulating consumption hinges on offering attractive products and services that will encourage consumers to open their wallets.
Beijing has attempted to address both perspectives in its consumption strategies. However, the government often leans toward supply-side initiatives, which avoid the need for difficult structural reforms.
A family walks past a shopping centre in Beijing. Photo: AFP
