China is set to introduce new measures aimed at promoting the consumption of services, with a focus on sectors such as elderly care, healthcare, and leisure. This strategic shift is intended to counterbalance the subdued demand for goods. However, analysts suggest that the plan’s success hinges on increasing household incomes and strengthening social welfare programs. Beijing views labour-intensive services as crucial for reorienting its economy towards consumption, as it seeks to reduce its dependence on large-scale investments and exports.
Authorities are expected to introduce incentives, ease market barriers, and invest in high-growth sectors to address supply gaps. However, policy advisors and analysts emphasize that deeper reforms are necessary to raise incomes and strengthen the social safety net. Unlike China’s manufacturing sector, where supply often exceeds demand, the services sector faces persistent shortages due to underdevelopment and years of policy bias towards factories.
Chinese leaders have pledged to significantly increase the share of household consumption in the economy over the next five years. Most policy advisors believe China should aim to raise its share to 45% by 2030, up from approximately 40% currently. They have also vowed to invest in people by increasing spending on education, healthcare, and social security, signalling stronger support for families and an effort to boost household spending power. This shift underscores China’s move toward a services-led consumption model.
Notably, the Chinese government is considering expanding consumption subsidies beyond goods to include services such as elderly care, dining, entertainment, and travel. Fiscal support may encompass subsidies for seniors, interest relief for service providers like nursing homes, and vouchers for home-based elderly care. Investors are closely monitoring the level of fiscal support Beijing will allocate to public services this year and whether income and welfare reforms will follow, acknowledging that any transition will be gradual as officials continue to prioritise manufacturing.
