China prioritises consumer spending ahead of technology as economic worries weigh

Reuters

05-03-2025

Summary
China looks to boost consumption to meet 5% growth goal in 2025
To expand trade-in scheme to lift spending on big-ticket consumer items
Technology still key amid complex external environment
SHANGHAI/BEIJING, March 5 (Reuters) - Spurring reluctant Chinese consumers to spend has been elevated to the top of Beijing's to-do list for 2025, leap-frogging technology and industrial production, as lawmakers look to rectify imbalances in the world's second-largest economy.
Chinese Premier Li Qiang's report on Wednesday to the annual meeting of the country's parliament on major tasks for 2025 promised a "special action plan" for vigorously boosting consumption and stimulating domestic demand as the country set a roughly 5% growth target for 2025.
Until now, Chinese officials have been hesitant to introduce policies that put more money into consumers' pockets, but such moves are being seen as increasingly important as Beijing fights a damaging trade war with Washington and needs Chinese consumers to step up and purchase the products other markets may buy less of as tariffs rise.
The term "consumption" was mentioned 31 times in Li's report, up from 21 times last year, while "technology" received 28 mentions, slightly up from 26 in 2024, according to Guotai Junan analysts.
Last year, modernising the industrial system and developing "new productive forces", a mantra coined by Chinese President Xi Jinping that refers to support for developing sectors such as electric vehicles and quantum computing to drive the economy, was the top priority.
China's household spending is less than 40% of annual economic output, some 20 percentage points below the global average. Investment, by comparison, is 20 points above.
"Beijing has recognised that previous supply-side technological stimulation led to an imbalance, with consumer demand and the services sector remaining subdued," said Tilly Zhang, a technology analyst at Gavekal Dragonomics.
Specific measures outlined to boost consumption this year include a significant expansion of China's trade-in scheme launched last year that so far has focused on electric cars, consumer electronics and appliances.
Ultra-long special treasury bonds valued at 300 billion yuan ($41.26 billion) would be issued to support the programme this year, an increase of 150 billion yuan over last year.
"By extending the programme to more products, refining procedures for claiming subsidies and improving the recycling system for old goods, we will be able to greatly boost spending on big-ticket items," China's finance ministry work report said.
Beijing also pledged more support for the care of elderly people and children and the broader healthcare system, moves long believed to be needed to give Chinese consumers a bigger safety net in order to feel comfortable spending more.
Faster spending growth for digital and smart products, culture, tourism and sports was promised, alongside refined policies on duty-free shops to stimulate consumption.
TECHNOLOGY STILL KEY
Still, China signalled technology would remain a key focus, warning that a "increasingly complex and severe external environment" could impact the country in areas such as trade, science and technology.
While the report did not directly mention the U.S., Bo Zhengyuan, a partner at Plenum China Research, said "there's an evident expectation that U.S. technology containment measures against China will further intensify."
Several rounds of U.S. chip restrictions have made it illegal for Chinese entities to obtain a wide range of advanced AI chips, prompting a domestic substitution plan.
Artificial intelligence was mentioned multiple times in the report, which said Beijing would boost support for the application of large-scale AI models. It also laid out plans to cultivate young scientists and engineers, in a sign of China's eagerness to build on the success of homegrown AI startup DeepSeek, which was mostly staffed by young researchers.
"China will strive to create an enabling environment for innovation that encourages exploration and tolerates failure," the report said.
China said it wants to foster "industries of the future" including embodied AI, which is crucial to developing humanoid robots, biomanufacturing, quantum computing and 6G technology.
Beijing also aims to facilitate breakthroughs in virtual reality, advanced computing and open-source RISC-V chips, the report said, pledging to increase funding support for these sectors and to encourage the growth of venture capital investment.
Zhang said the report's emphasis on "effective investment" indicated a move away from broad interventions such as massive state funding that has flowed into semiconductors, and also signalled a softening of China's stance on self-reliance.
"Officials seem to recognise that achieving self-sufficiency across all sectors may be unrealistic, and they're more focused on leading future technological developments rather than defending existing positions," she said.
($1 = 7.2705 Chinese yuan renminbi)