China accelerates consumption-driven growth model

Editor's note: China recently issued a special action plan for boosting consumption, focusing on enhancing consumption capacity, releasing consumption willingness, optimizing consumption environments and unlocking consumption bottlenecks.

This comprehensive policy package introduces far-reaching measures to refine institutional mechanisms for consumption promotion, unlock new market potential, and accelerate China's shift toward a consumption-driven economic growth model.

Let's take a look at how the special action plan will facilitate consumption.

The plan aims to increase residents' income with a multi-pronged approach, focusing on:

-Promoting reasonable growth in wages.

-Expanding channels for property income.

-Implementing diverse measures to raise rural incomes.

-Resolving payment arrears to enhance consumption circulation.

Wang Jingwen, director of the Macro Research Center affiliated to the China Minsheng Bank Research Institute:

The capital market performance directly impacts residents' property income. Since September 2024, policy efforts to boost the capital market and stabilize stocks and real estate reflect the central authorities' prioritization. The special action plan builds on these strategies, promising healthier market development and improved consumption capacity.

Liu Shijin, former deputy director of the Development Research Center of the State Council:

Urban and rural pensions should be raised from 220 yuan ($30.41) per month to 400 yuan per month in one to two years, 600 yuan in three years, and 1,000 yuan in five years. The consumption potential exceeding 1 trillion yuan is expected to be unlocked, driving nearly 1 percentage point of annual GDP growth.

The plan aims to alleviate rigid expenditure pressure to release consumption willingness

The special action plan emphasizes the protection of flexible employees, rural migrant workers, and workers in new forms of employments, focusing on securing their rights in childbirth, childcare, education, healthcare, and elderly care as part of its consumption capacity support measures.

Key measures:

- Expand educational resources in population-inflow cities.

- Promote the abolition of the household registration restrictions for flexible employment workers to participate in basic old-age and medical insurance at the place of employment, and expand the trial of occupational injury protection.

-Ensure the basic livelihood of key groups and strengthen assistance for low-income people.

Lu Ming, distinguished professor at Shanghai Jiao Tong University's Antai College of Economics and Management:

Populous cities face enormous demands for public services. Equalizing education and healthcare access for migrants will enhance the public well-being, ensure sustainable investment, and drive growth.

Establishing a unified national pension insurance system is urgent to realize barrier-free transfer and continuity of pension insurance relationship is an urgent need to protect the rights and interests of the migrating population and promote the rational flow of the labor force. This will not only help eliminate the worries of the migrating population's cross-regional employment but also improve the operational efficiency of the pension insurance system and promote the modernization of the social security system.