Expanding domestic demand is a strategic move.

In the past, China’s productive capacity lagged behind, so the focus of policy was on expanding investment and boosting production capacity. Today, however, overall overcapacity persists, and continued reliance on large-scale investment to drive growth has limited effectiveness and diminishing marginal returns. While investment can serve as a crucial short-term engine for economic growth, final consumption is the sustainable driver of long-term expansion. Therefore, while it remains important to expand effective investment and harness its pivotal role, we must also more effectively leverage consumption as the fundamental foundation for growth.

(Speech at the Second Plenary Session of the Fifth Plenary Session of the 18th CPC Central Committee, October 29, 2015)

Supply and demand are the two fundamental aspects of the intrinsic relationship in a market economy; they constitute a dialectical unity of opposition and interdependence. Each is indispensable to the other: supply cannot exist without demand, and new demand can give rise to new supply; likewise, demand cannot be satisfied without supply, and new supply can create new demand.

The supply side and the demand side are the two fundamental tools for managing and regulating the macroeconomy. Demand-side management focuses on addressing aggregate-level issues and emphasizes short-term stabilization, primarily through adjustments to taxation, fiscal spending, and monetary and credit policies to stimulate or dampen demand and thereby promote economic growth. Supply-side management, by contrast, centers on resolving structural problems and aims to unleash the drivers of economic growth, mainly by optimizing factor allocation and adjusting the production structure to enhance the quality and efficiency of the supply system and, in turn, foster economic expansion.

Throughout the history of global economic development, the choice between prioritizing the supply side or the demand side in economic policy must be determined by a country’s macroeconomic conditions. It is one-sided to advocate for the supply side while neglecting the demand side, or vice versa; the two are not mutually exclusive substitutes, but rather require coordinated and complementary efforts.

(Speech delivered at the Special Seminar for Principal Leading Cadres at the Provincial and Ministerial Levels on Studying and Implementing the Spirit of the Fifth Plenary Session of the 18th CPC Central Committee, January 18, 2016)

We will steadfastly implement the strategy of expanding domestic demand. Building a comprehensive domestic-demand system is vital to China’s long-term development and enduring stability. Since the reform and opening-up, particularly following China’s accession to the World Trade Organization, our country has integrated into the global economic cycle, adopting a development model characterized by “both ends abroad” in terms of markets and resources—such as mineral resources—and by serving as the “world’s factory.” This model has played a crucial role in helping China seize the opportunities presented by economic globalization, rapidly enhance its economic strength, and improve the lives of its people. In recent years, however, economic globalization has encountered headwinds, and the current pandemic may further exacerbate the trend toward deglobalization, with a marked rise in national self-interest and inward-looking tendencies. As a result, the external environment facing China’s development could undergo significant changes. Therefore, implementing the strategy of expanding domestic demand is essential: it is necessary to address the impact of the pandemic; it is essential to ensure the long-term, sustainable, and healthy development of China’s economy; and it is indispensable for meeting the people’s growing aspirations for a better life.

The strength of a major economy lies in its internal self-sustaining circulation. With a population of 1.4 billion and a per capita GDP that has surpassed US$10,000, China is the world’s largest and most promising consumer market. The ongoing optimization and upgrading of household consumption, when combined with modern technology and advanced production methods, holds enormous potential for growth. We must firmly anchor ourselves to the strategic priority of expanding domestic demand, ensuring that the production, distribution, circulation, and consumption stages all increasingly rely on the domestic market to achieve a virtuous cycle. At the same time, we need to clearly define the strategic direction of supply-side structural reform and promote a dynamic equilibrium between aggregate supply and aggregate demand at a higher level. Expanding domestic demand and further opening up are not mutually exclusive; the smoother the domestic circulation, the stronger the pull it exerts on global resources and factors of production, the more conducive it is to establishing a new development pattern in which the domestic circulation plays the dominant role while domestic and international circulations reinforce each other, and the more advantageous it becomes for cultivating new strengths in international competition and cooperation.

Consumption is a key driver of China’s economic growth, and the middle-income group serves as its crucial foundation. At present, China has roughly 400 million middle-income individuals, the largest such cohort in the world in absolute terms. Expanding the size of the middle-income group should be made a major policy objective, with efforts focused on optimizing the income distribution structure and establishing a sound mechanism whereby market forces determine the contribution of production factors—such as knowledge, technology, management, and data—and accordingly set remuneration based on that contribution. Furthermore, investment in human capital must be increased so that more ordinary workers can, through their own efforts, move into the middle-income bracket.

(Speech Delivered at the Seventh Meeting of the Central Financial and Economic Commission on April 10, 2020)

Since the beginning of this year, I have repeatedly emphasized the need to foster a new development pattern in which the domestic circulation plays the dominant role while the domestic and international circulations reinforce each other. This new development pattern has been put forward in light of changes in China’s stage of development, its external environment, and its underlying conditions; it represents a strategic choice for reshaping China’s new advantages in international cooperation and competition. In recent years, as the external environment has evolved and China’s factor endowments have shifted, the momentum of the international large-scale circulation—characterized by markets and resources being concentrated at both ends—has markedly weakened, whereas China’s domestic demand potential has continued to unfold and the vitality of the domestic circulation has grown steadily, creating an objective dynamic of one side declining as the other rises. The academic community has engaged in extensive discussions on this objective phenomenon, and further in-depth research is warranted to generate insightful and well-founded perspectives.

Since the 2008 global financial crisis, China’s economy has been shifting toward a development model in which the domestic circulation plays the dominant role. The ratio of the current-account surplus to GDP has fallen from 9.9% in 2007 to less than 1% today, and on seven occasions the contribution of domestic demand to economic growth has exceeded 100%. In the period ahead, the feature of the domestic market leading the national economic cycle will become even more pronounced, and the potential of domestic demand for driving economic growth will continue to be unleashed. We must remain committed to supply-side structural reform as our strategic direction and focus on expanding domestic demand as our strategic pivot, so that production, distribution, circulation, and consumption increasingly rely on the domestic market, enhance the supply system’s ability to meet domestic demand, and achieve a higher-level dynamic equilibrium in which demand drives supply and supply creates demand.

(Speech Delivered at the Symposium of Experts in the Economic and Social Spheres on August 24, 2020)

We must accelerate the development of a comprehensive domestic demand system. This is a crucial foundation for ensuring the smooth circulation of the national economy and strengthening the dominant position of the domestic major circulation. Economic activity is a dynamic, cyclical process that repeats itself continuously. We need to advance deep-seated reforms and strengthen policy guidance, with a focus on unblocking the key bottlenecks that constrain economic circulation. Taking the satisfaction of domestic demand as the fundamental starting point, we should integrate the implementation of the strategy to expand domestic demand with the deepening of supply-side structural reform, strive to enhance the alignment between the supply system and domestic demand, and thereby establish a higher-level dynamic equilibrium in which demand drives supply and supply creates demand. We must also strengthen the development of a modern circulation system, improving both its physical infrastructure and digital platforms, as well as its distribution channels and online platforms, so as to consolidate the vital foundation for the dual circulation—domestic and international.

(Speech Delivered at the Second Plenary Session of the Fifth Plenary Session of the 19th CPC Central Committee on October 29, 2020)

On upholding the strategic cornerstone of expanding domestic demand: fostering a robust domestic market is a vital pillar for establishing the new development paradigm and embodies the inherent advantages of a major economy. The expansion of domestic demand we emphasize goes beyond merely increasing government public spending; it requires the establishment of effective institutional arrangements to appropriately guide consumption, savings, and investment.

The most fundamental way to expand consumption is to promote employment, improve social security, optimize the income distribution structure, expand the middle-income group, and make solid progress toward common prosperity. Expanding consumption must be integrated with improving the quality of people’s lives, tailored to the actual needs of different income groups, and supported by high-quality supply that enhances both consumers’ purchasing power and willingness to spend. We should systematically lift administrative restrictions on consumer purchases to unlock latent consumption potential; align with the trend of upgrading consumption patterns by innovating new forms and models of consumption, thereby fostering new growth drivers such as service consumption and encouraging the repatriation of overseas spending. Special attention should be given to rural consumption demand, fully tapping the untapped potential in county and township markets. We need to improve the vocational and technical education system to achieve fuller and higher-quality employment. Moreover, public consumption should be appropriately increased, with greater efficiency in spending on public services such as education, healthcare, elderly care, and childcare.

We must strengthen the momentum for investment growth and continue to play a pivotal role in this regard. We need to optimize the investment system and facilitate the rational conversion of savings into investment. The guiding and leveraging role of central budgetary investment should be fully brought into play, with particular emphasis on areas that exhibit strong spillover effects and deliver high social benefits. We must comprehensively improve the investment environment, foster sound investment expectations, and stimulate investment vitality across society. We should vigorously develop the digital economy, increase investment in new infrastructure, accelerate the digital, intelligent, and green transformation of traditional industries, and promote both the digitalization of industries and the industrial application of digital technologies. We should disseminate advanced and applicable technologies and expand investment in equipment upgrades and technological renovations in the manufacturing sector. We must deepen the advancement of new urbanization, implement urban renewal initiatives, and carry out renovation projects for older residential communities in urban areas. We should enhance infrastructure and logistics capabilities, build a modern logistics system, and launch a number of major projects in such fields as integrated transportation, basic scientific research, public health, ecological conservation, and rural development.

(Speech at the Central Economic Work Conference on December 16, 2020)

In today’s world, the most scarce resource is the market. The market represents a tremendous advantage for China, and we must fully harness and leverage this advantage, continuously consolidate and strengthen it, and turn it into a robust pillar for forging a new development paradigm. Expanding domestic demand is neither a temporary measure to address financial risks and external shocks, nor a policy of indiscriminate, large-scale stimulus; much less does it mean simply increasing government spending. Rather, it requires establishing effective institutional mechanisms for expanding domestic demand that are tailored to China’s actual economic conditions, unlocking the full potential of domestic demand, accelerating the development of a comprehensive domestic-demand system, strengthening demand-side management, expanding household consumption, and raising the quality of consumption—thereby making the building of an ultra-large domestic market a sustainable historical process.

(Speech Delivered at the Special Seminar for Principal Leading Cadres at the Provincial and Ministerial Levels on Studying and Implementing the Spirit of the Fifth Plenary Session of the 19th CPC Central Committee, January 11, 2021)

We must steadfastly focus on promoting high-quality development, seamlessly integrate the strategy of expanding domestic demand with deepening supply-side structural reform, strengthen the endogenous momentum and reliability of the domestic circulation, enhance the quality and level of the international circulation, accelerate the building of a modernized economic system, make concerted efforts to raise total factor productivity, bolster the resilience and security of industrial and supply chains, advance integrated urban–rural development and balanced regional development, and ensure that the economy achieves both qualitative improvement and reasonable quantitative growth.

(Report to the 20th National Congress of the Communist Party of China, October 16, 2022)

Insufficient aggregate demand is the most salient contradiction confronting the current economic operation. It is imperative to vigorously implement the strategy of expanding domestic demand and adopt more robust measures to ensure a virtuous cycle in social reproduction. China has effectively countered the 1998 Asian financial crisis, the 2008 global financial crisis, and the impact of the COVID-19 pandemic since 2020 by expanding domestic demand, thereby accumulating valuable experience. Moving forward, we must refine policy measures and fully leverage the fundamental role of consumption and the pivotal role of investment.

First, we must prioritize the restoration and expansion of consumption. As China continues to advance new-type industrialization, informatization, urbanization, and agricultural modernization, consumption is increasingly becoming a fundamental driver of economic growth. We need to enhance consumers’ purchasing power, improve consumption conditions, and innovate consumption scenarios, so as to fully unlock consumption potential. Since consumption is a function of income, we must increase the incomes of both urban and rural residents through multiple channels, with particular emphasis on boosting the purchasing power of low- and middle-income groups—whose propensity to consume is high but who have been disproportionately affected by the pandemic. We should also appropriately expand consumer credit to support spending on housing improvements, new-energy vehicles, elderly care services, and education, healthcare, cultural, and sports services.

Second, we will effectively leverage government investment and policy incentives to stimulate investment across the entire economy. At present, private-sector investment expectations remain weak; therefore, government investment must play a robust guiding role, serving as a powerful tool for countering cyclical economic fluctuations. Government investment should be intensified in areas that lay solid foundations, deliver long-term benefits, address critical shortcomings, and promote structural adjustment. We will accelerate the implementation of major projects outlined in the 14th Five-Year Plan, strengthen infrastructure development in transport, energy, water conservancy, agriculture, and information technology, and enhance inter-regional infrastructure connectivity. Support will be provided for building modern infrastructure systems in city clusters and metropolitan circles, and for launching urban renewal and rural development initiatives. Investment in science and technology and in key industries will be expanded, with proactive efforts made to develop major scientific and technological infrastructure and to bolster R&D capabilities in critical core technologies. Policy-based finance should fulfill its counter-cyclical regulatory function by increasing financing support for major projects that align with national development plans and industrial policies, while striking an appropriate balance between economic and social benefits. Market access for private investment should be broadened, and private capital should be encouraged and attracted to participate more extensively in the construction of major national projects and in initiatives aimed at addressing critical weaknesses. Furthermore, we will strengthen project pipelines and preliminary work, and ensure adequate provision of essential factors of production.

(Speech at the Central Economic Work Conference on December 15, 2022)

We must better coordinate the expansion of domestic demand with the deepening of supply-side structural reform, thereby bolstering the momentum and reliability of the domestic economic loop. The key to forging a new development paradigm lies in ensuring the unimpeded flow of economic cycles. Whether this can be achieved hinges largely on whether both the supply and demand sides are robustly driven, broadly aligned, dynamically balanced, and engaged in positive, mutually reinforcing interactions. To this end, we need to seamlessly integrate the strategy of expanding domestic demand with the deepening of supply-side structural reform, mobilizing both supply and demand simultaneously and in coordinated fashion, so as to establish a higher-level dynamic equilibrium in which demand pulls supply and supply creates demand, thus fostering a virtuous cycle of the national economy. We must resolutely implement the Outline for the Strategy of Expanding Domestic Demand, swiftly put in place a comprehensive domestic-demand system, and focus on expanding consumption demand supported by income, investment demand that yields reasonable returns, and financial demand constrained by principal and debt obligations. We should establish and refine long-term mechanisms for boosting household consumption, ensuring that households have stable incomes to spend, feel confident about spending without undue concerns, and enjoy a favorable consumption environment that enhances their sense of satisfaction and encourages them to consume more. We must improve the mechanisms for expanding investment, broaden the scope for effective investment, appropriately advance the deployment of new infrastructure, increase investment in high-tech industries and strategic emerging industries, and continuously stimulate the vitality of private investment. Moreover, we must continue to deepen supply-side structural reform, persistently promote innovation in science and technology as well as institutional innovation, break through bottlenecks, chokepoints, and vulnerabilities that constrain supply, enhance the competitiveness and security of industrial and supply chains, and ensure that self-reliant, controllable, high-quality supply can meet existing demand while also creating and leading new demand. Severe imbalances and misalignments between supply and demand, coupled with obstructed cyclical flows, are among the root causes of major risks in the economic and financial sectors; therefore, effectively coordinating the expansion of domestic demand with the deepening of supply-side structural reform will also help prevent and defuse such risks.

(Speech Delivered at the Second Collective Study Session of the 20th CPC Central Politburo on January 31, 2023)

It is imperative to strike a balanced relationship between aggregate supply and aggregate demand and ensure the smooth functioning of the national economic cycle. We must uphold coordinated efforts on both the supply and demand sides to achieve dynamic equilibrium, continue to deepen supply-side structural reform with a mix of proactive measures and prudent restraint, and enhance the compatibility and balance between supply and demand. Expanding domestic demand is vital not only for economic stability but also for economic security; it is not a short-term expedient but a strategic initiative. We need to accelerate efforts to address shortcomings in domestic demand, particularly in consumption, so that domestic demand can serve as the primary driver of economic growth and a stabilizing anchor.

(Speech at the Central Economic Work Conference on December 11, 2024)

The draft Proposal underscores the need to strengthen the domestic major circulation, making arrangements for building a robust domestic market and accelerating the establishment of a high-standard socialist market economy. It emphasizes adhering to the strategic pivot of expanding domestic demand, closely integrating measures to improve people’s livelihoods with efforts to boost consumption, and aligning investment in physical assets with investment in human capital. The proposal calls for vigorous efforts to revitalize consumption, expand effective investment, and resolutely remove bottlenecks and obstacles that impede the development of a unified national market. It also stresses fully unleashing the vitality of all types of market entities, speeding up the improvement of institutional mechanisms for market-based allocation of production factors, and enhancing the effectiveness of macroeconomic governance. At the same time, the proposal advocates expanding international circulation, steadily advancing institution-based opening-up, safeguarding the multilateral trading system, and promoting high-quality joint efforts to build the Belt and Road Initiative.

(Explanation on the “Suggestions of the CPC Central Committee on Formulating the 15th Five-Year Plan for National Economic and Social Development,” October 20, 2025)