Distinguished guests, teachers, and students:

Hello everyone. The title of my remarks today is “Boosting Consumption: The Key Is to Activate the Endogenous Momentum of Household Consumption.”

Boosting consumption, also described as expanding or stimulating consumption, is not a new topic. But at this particular moment, as the 15th Five-Year Plan period begins, the task looks different in one important respect: policy efforts to boost consumption should focus more directly on strengthening households’ endogenous willingness and capacity to consume. That is the core point that needs to be made clear.

I. Facing squarely four new challenges

The Annual Central Economic Work Conference has put forward the concepts of long-standing and new challenges. In the case of boosting consumption, what are the new challenges behind this familiar agenda?

The first is the challenge to keep economic growth within a reasonable range during the 15th Five-Year Plan period. The 20th National Congress of the Communist Party of China set the goal of basically achieving socialist modernisation by 2035. With only ten years remaining until 2035, the 15th Five-Year Plan period is a critical phase for laying the groundwork and scaling up efforts.

The Fourth Plenary Session of the 20th Central Committee of the Communist Party of China further proposed that the 15th Five-Year Plan period should deliver decisive progress towards basically achieving socialist modernisation. This is not merely a qualitative aspiration; it also comes with firm quantitative requirements. One key benchmark is that per capita GDP should reach the level of moderately developed countries. Using 2025 figures, the entry threshold is roughly US$25,000 to US$26,000. China’s per capita GDP in 2024 was US$13,500. In other words, per capita GDP would need to roughly double over the next ten years to meet that benchmark.

This implies that China’s development agenda has entered a “countdown” phase. Any discussion of boosting consumption must therefore start from a clear premise: over the next decade, growth needs to be kept within a reasonable range.

The second challenge is: What will drive and sustain growth within a reasonable range? A broad consensus has now formed that consumption is both the primary engine of economic growth and a stabilising anchor. Put plainly, keeping growth within a reasonable range depends mainly on domestic demand—and, within domestic demand, first and foremost on consumption. Any discussion of boosting consumption has to engage with this proposition directly.

The third challenge is that, within the realm of domestic demand, the most prominent constraint at present is weak consumption. The Central Economic Work Conference noted that “the contradiction of strong domestic supply and weak domestic demand is acute.” The clearest expression of “weak demand” is, precisely, sluggish consumption.

The 2025 trajectory of growth in total retail sales of consumer goods illustrates this clearly. Growth reached 6.4% in May 2025, then fell steadily, dropping to 1.3% by November. December data have not yet been released, but the trend points to a level around 1%, or slightly above. [In December, the total retail sales of consumer goods in China rose by 0.9% year on year. The data was released on 20 January, three days after Gao’s speech. —Yuxuan’s note]

2025 was the year in which China’s fiscal and monetary policies were mobilised most intensively to support consumption, with the associated policy costs likely reaching historical highs. When the relationship between policy inputs and outcomes is taken into account, weak consumption necessarily emerges as the central issue. If the objective is to expand domestic demand, the priority must be to overcome this weakness in consumption.

The fourth challenge is that today’s shortfall in consumption demand has distinctive features of its own. Taking total retail sales of consumer goods as the core indicator, insufficient consumption can be divided into four scenarios: volume and prices rising together; volume and prices falling together; volume rising while prices fall; and volume falling while prices rise. The weakness in consumption demand in 2025 falls squarely into the third category—volume rising while prices fall.

Data released by the Ministry of Culture and Tourism on 21 October 2025 can serve as supporting evidence. In the first three quarters of 2025, domestic residents made 4.988 billion trips, an increase of 18% year on year, while total tourism spending reached RMB 4.88 trillion, up 11.5%. These headline figures appear robust, but the gap of 6.5 percentage points between the two growth rates is telling. Average spending per trip actually declined, from RMB 1,024 in 2024 to RMB 970.

II. Telling four “new stories” well

The domestic travel data cited above show a distinctive pattern in current domestic consumption: volume is rising, while prices are falling. This suggests that China’s economy has new stories to tell, and that consumption, as part of the broader economic picture, also has new stories. The basic logic behind these new developments needs to be explained clearly and made widely understood.

The first “new story” concerns insufficient consumption demand under the intertwined dynamics of rising volume and falling prices. When discussing total retail sales of consumer goods, the scale of consumption, and related indicators, it is essential to separate the “volume” and “price” components. In essence, consumption is volume times price. At present, the main source of consumption weakness lies mainly in falling prices, and these price declines are not the result of changes in market supply-and-demand relations.

The second “new story” is to look beyond the surface and identify what sits behind insufficient consumption demand—namely, expectations and confidence. The tourism market provides a clear example: the core reason per-capita spending has fallen is not shifting supply-and-demand conditions, but weaker market expectations and subdued consumer confidence. What looks like weak demand on the surface is, at its root, weaker expectations; what appears to be insufficient consumption is, in substance, insufficient confidence.

The Government Work Report delivered at the 2025 National People’s Congress identifies one particularly prominent contradiction: “Sluggish domestic demand was compounded by weak public expectations .” Linking weak domestic demand with weak expectations in discussing the prominent challenges facing China’s economic performance is something that warrants special attention.

The third “new story” that needs to be told well is the relationship between pressures on employment and income, weaker expectations, and insufficient demand.

What has led to weaker market expectations and a lack of confidence across society? The draft proposals on the 15th Five-Year Plan issued by the Fourth Plenary Session of the 20th CPC Central Committee explicitly note that current economic performance faces the challenge of “considerable pressure weighing on employment and personal income growth” The Central Economic Work Conference contains similar language.

It is precisely these pressures on employment and income growth that have weakened households’ expectations about future job prospects and income growth, thereby suppressing current consumption demand.

The fourth “new story” is the need to view consumption through three dimensions: demand, supply, and expectations. The Annual Central Economic Work Conference in 2021 made an important judgment with a historic turning-point significance: “China’s economic development is facing pressure from demand contraction, supply shocks and weakening expectations.”

Re-reading this statement at today’s historical juncture, it is more than a list of problems and contradictions. More importantly, it provides a framework for understanding them. Whether the task is to discuss consumption or to assess the broader economic situation, the approach must differ from the past: demand, supply, and expectations need to be examined together, as part of an integrated analysis.

III. Reaffirming four basic common understandings

In exploring how to boost consumption amid profound changes in the economic landscape, several points basic to economic reasoning need to be reaffirmed and kept firmly in view.

First, consumption is a function of income and wealth accumulation. Changes in the pattern of income and wealth accumulation shape the direction of households’ expectations and confidence. When pressures on employment and income alter expectations and lead to insufficient consumption, efforts to boost consumption must start with improving the underlying pattern of income formation and wealth accumulation.