BEIJING — China is preparing new measures to stimulate spending on services, betting that sectors such as elderly care, healthcare and leisure can help offset weak demand for goods. Analysts caution, however, that the strategy will only succeed if household incomes rise and social welfare support is strengthened.
Beijing sees labour-intensive services as central to shifting the economy toward consumption and reducing reliance on investment and exports. Authorities are expected to roll out incentives, lower market barriers and increase investment in high-growth areas to address supply shortages, but advisers say deeper reforms are needed to lift incomes and expand the social safety net.
Unlike manufacturing — where excess capacity is common — China’s services sector remains underdeveloped after years of policy bias toward factories, resulting in persistent supply gaps.
“Policymakers are placing greater emphasis on services consumption given its large potential, but expansion will be gradual and tied to the pace of broader economic restructuring,” said a policy adviser.
Leaders have pledged to significantly raise the share of household consumption in the economy over the next five years, with many advisers targeting about 45% of GDP by 2030, up from roughly 40% today. Officials have also promised to “invest in people” by increasing spending on education, healthcare and social security to boost household purchasing power.
Consumers are already shifting spending toward services such as elderly care, travel and entertainment as demand for big-ticket goods plateaus and per-capita income approaches $14,000. Services sales grew 5.5% in 2025, outpacing goods growth of 3.7%, while per-capita services consumption rose to 46.1% of total spending, up from 40.3% in 2014.
China’s economy expanded 5% last year, meeting official targets largely through strong exports that offset subdued domestic consumption. Retail sales of goods grew just 0.9% in December, while factory output rose 5.2%.
Household consumption remains about 20 percentage points of GDP below the global average, while investment is around 20 points higher. China also accounts for roughly 30% of global manufacturing output. Economists say boosting consumption is feasible but depends on the strength of policy commitment.
The government is considering extending consumption subsidies beyond goods to cover services such as elderly care, dining, entertainment and travel. Possible measures include subsidies for seniors, interest support for service providers, vouchers for home-based care, longer paid holidays, and relaxed restrictions on high-end leisure activities.
However, officials are expected to move cautiously, as manufacturing remains a policy priority. China is also gradually scaling back goods-focused stimulus to avoid sharp declines in sales.
Supply constraints remain the biggest challenge. The central bank has launched a relending facility to support elderly care and services consumption, but analysts estimate a multitrillion-yuan investment gap in the sector. Elderly care capacity remains limited, with about 30 beds per 1,000 seniors, well below levels in advanced economies.
Rising demand has prompted some households to invest in private care options, while many retirees on modest pensions continue to rely on home-based care and hope for more affordable public nursing facilities.
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