Last year, right before 2024’s Central Economic Work Conference, we wrote an essay arguing that domestic consumption had finally been elevated to a high priority in China’s policy hierarchy. At the time, the signals looked real. Consumption was mentioned more often. There were even policies that, at least symbolically, pointed in the right direction.
That essay did not age particularly well.
By the end of 2025, few people would seriously argue that domestic consumption had become China’s top priority. Yes, consumption mattered. Yes, there were incremental pro-demand policies that would have been unthinkable a few years earlier—childbirth subsidy program, being the most visible example.
But taken together, these measures felt too small and too cautious. Even the birth subsidy program felt too modest. The familiar hesitation was still there. Consumption was encouraged, but never fully embraced.
And yet, over the past weeks, something genuinely different has begun to emerge.
First came Qiushi, the theoretical journal of the CPC Central Committee, publishing a curated series of Xi Jinping’s speeches from the past decade on domestic consumption. This was not a casual archival exercise. Several things stood out immediately. Consumption—more precisely, domestic demand—was explicitly framed as a strategic issue, not merely a desirable outcome. More importantly, a 2023 passage was highlighted in which Xi stated plainly that the key to boosting consumption is boosting income.
This matters because it eliminates any ambiguity about diagnosis. The leadership understands the problem. It understands the causal chain, so there is no intellectual confusion here. If execution fails, it is not because Beijing does not know what needs to be done.
Soon after, a senior official from the Central Office for Economic and Financial Affairs went further, stating outright that:
扩大内需是明年排在首位的重点任务。
“Expanding domestic demand will rank as the foremost priority next year.”
At the same time, People’s Daily, CPC’s main mouthpiece, just issued an explainer on why domestic demand ranks at the No.1 spot of all eight main priorities of next year:
Looking ahead, it is essential to genuinely enhance households’ consumption capacity and improve the social security system.
The investment structure should be optimized, with greater emphasis on consumption-related sectors, to promote a virtuous cycle between investment and consumption.
The official signaling can’t be clearer. So why is the market still not paying enough attention?
Because for years, the story of “boosting China’s domestic demand” has been a textbook case of that boy who cried wolf. More than a decade of speeches and urgings about consumption, demand, and rebalancing (including the Xi articles from Qiushi) can just as easily be read as proof that recognition has never been the constraint. It’s all about execution. If the problem has been so well understood for so long, why hasn’t it been decisively solved?
From this perspective, skepticism is entirely understandable.
Still, I think this time may be different—and that this possibility is being under-discussed. Let me explain.
First, I need to introduce a mental framework I use when thinking about China’s policymaking system. I sometimes call it the “Zhongnanhai Priority Framework.”
China is an all-encompassing state. Party documents touch everything: the economy, national security, education, technology, healthcare, the environment, ethnic policy, ideology. On paper, everything is always important.
In reality, nothing ever works that way.
A system this large cannot pursue a hundred objectives simultaneously. What matters is not what appears in documents, but what sits at the very top of the priority list on the leadership’s work desk—and that list is reordered constantly. When an issue genuinely rises to the top, the system can be astonishingly effective. Environmental enforcement in 2015–2016 is one example. Poverty alleviation was another. Anti-corruption at its peak was a third.
China does priorities extremely well. But the flip side of that is that it does non-priorities poorly.
For something as fundamental and sticky as shifting the fundamental growth engine from investment to consumption, partial prioritization is not enough. This is not a small technocratic tweak. It requires consumption to sit at the absolute top of that priority list, because there is immense institutional inertia against it.
Put yourself in the shoes of a mayor or county chief. You have a roughly three-year term. You want GDP growth, fiscal revenue, and employment stability. Do you focus on attracting a factory line that shows up cleanly in investment and output statistics? Or do you distribute cash or income support to households, hoping it turns into consumption rather than the more likely destination of even more savings?
The rational choice is obvious. Investment is fast, measurable, and politically safe. Consumption is uncertain, indirect, and often fiscally unrewarding for local governments. Even when households spend more, China’s tax structure means local governments capture little of the upside. Not to mention, China’s local governments have been severely underfunded for the past few years due to the real estate slump, making fiscal resources even more precious.
The local pushback is thus structural, and it is why exhortations alone do nothing. Overcoming it requires overwhelming top-down force, coordination across ministries, and meaningful changes to fiscal and tax incentives. Anything less simply dissipates.
Seen through this lens, it becomes obvious why 2025 did not see real action on demand. The core priority of 2025 was unmistakable. Everyone knows: it’s none other than the second Trump administration and the renewed trade war. The entire government sector braced itself for the impact of this event. Everything else, including consumption, was secondary. That was not a close call.
Here is where the setup for 2026 begins to look different.
