According to China Daily, February 12, 2026
China is shifting its focus from short-term stimulus to long-term structural measures aimed at expanding domestic consumption, according to senior economists. The approach emphasizes household income growth, wealth distribution, and social safety nets as the main levers for sustainable demand.
“Short-term campaigns or temporary incentives can help consumption, but long-term growth depends on people’s income, savings, and access to social security,” said Lin Shuanglin, professor of economics at Peking University.
As the country enters the first year of its 15th Five-Year Plan (2026–30), fiscal policies are expected to prioritize investments in people. Vice-Minister of Finance Liao Min has signaled continued proactive spending, including measures to enhance household income and strengthen social protection.
Policy Moves to Support Income and Consumption
Economists suggest that broad-based tax cuts could be a key tool. Lin recommends lowering the standard corporate income tax from 25% to 20% to benefit labor-intensive enterprises, encouraging them to expand employment and boost household incomes.
“High-tech companies enjoy preferential rates, but labor-intensive firms often do not,” Lin said. “A general rate reduction would directly increase wages and disposable income for a large segment of workers.”
On the welfare side, expanding public services such as senior high school education and incentive-based pension schemes could reduce precautionary savings, further supporting household spending. For example, interest-subsidized personal pension accounts for rural residents could encourage long-term savings while stimulating future consumption.
Aligning Local and Central Fiscal Roles
Lin also highlighted the importance of central government fiscal leadership. Currently, central government expenditure accounts for roughly 14% of the total budget. Lin estimates that assuming responsibility for basic pensions and medical insurance could increase this share to over 30%, creating a more unified and equitable national labor market.
Meanwhile, local governments are encouraged to shift away from production-based taxes toward retail sales taxes, aligning fiscal incentives with consumer market development and a unified domestic market.
Implications for Investors
Consumer-focused sectors: Policies that enhance disposable income and social protections support growth in retail, education, healthcare, and eldercare services.
Labor-intensive industries: Tax reductions could improve profitability and encourage expansion, making these sectors attractive for foreign and domestic investors.
High-quality domestic goods: Rising domestic demand for green energy and environmental products supports exports, creating global trade opportunities.
“High-quality domestic products attract both local and international consumers, while expanded imports diversify choices for Chinese households,” Lin noted, highlighting the potential for investors to benefit from structural shifts in domestic consumption.