China to bet on services to make consumers spend again, will it be enough?

China is turning to services and experiences as a new lever to revive domestic demand, as weak household confidence, a prolonged property slump, and slowing exports weigh on the world’s second-largest economy.

On Thursday, the State Council released a work plan aimed at boosting services consumption over the coming years, spanning cruise and yacht tourism, elderly care, sports events, culture, education, and household services.

The move underscores Beijing’s growing recognition that traditional stimulus tools are proving less effective in lifting consumer spending.

A pivot toward services and experiences

The work plan seeks to “accelerate the cultivation of new growth drivers in service consumption” and “improve and expand the supply of services,” according to the cabinet notice.

Authorities pledged to advance high-quality yacht consumption, overhaul yacht safety-management regulations, and upgrade infrastructure,* including public docks and berths.

On tourism, China will expand self-drive travel, promote experience-oriented business models, and support “tourism-oriented” upgrades to train stations and scenic rail routes.

The plan also calls for expanding visa-free entry for more countries and adding tax-refund points at border crossings to boost inbound travel.

Sports and live events are another focus.

Authorities said they would increase the supply of high-quality events, encourage the introduction of top international competitions, and promote high-quality outdoor sports destinations.

The shift reflects a broader attempt to raise the share of consumption in China’s economy, at a time when households remain reluctant to spend on big-ticket goods despite trade-in subsidies for cars and appliances.

Why Beijing is changing tack

China’s renewed push comes as officials confront persistent domestic headwinds.

Retail sales grew 3.7% in 2025, trailing industrial output growth of 5.9% and overall economic expansion of 5%.

Consumer inflation was flat last year, while producer prices fell for a third consecutive year, extending a deflationary stretch that has weighed on corporate profits and wage expectations.

Early indicators compiled by China Beige Book showed services consumption slowed sharply in January, with travel, hospitality, and chain restaurants reporting broad-based weakness.

At the same time, concerns are rising that the export boom, which cushioned the economy from US tariff shocks last year, may be difficult to sustain.

Even so, policymakers appear encouraged by signs that household preferences are shifting.

A quarterly survey by the People’s Bank of China for the fourth quarter of 2025 showed the share of respondents planning to increase spending on social and entertainment activities over the following three months reached an eight-year high, while interest in big-ticket purchases remained well below pre-pandemic levels.

“Emotional satisfaction is playing a bigger role in retail spending, with a growing focus on buying for self-expression and experiences rather than for materialistic possessions or brand prestige,” according to analysts at S&P Global.

Financing and policy support

The State Council plan also includes financial measures to underpin the push.

Banks will be encouraged to expand credit to service-consumption firms, while qualified companies in culture, tourism, education, sports, and household services will be allowed to raise funds through bond issuance.

A more developed service sector aligns with China’s broader policy goals.

Services consumption per capita rose to 46.1% last year, but remains well below levels seen in many advanced economies, suggesting room for growth.

Services are also more labor-intensive than manufacturing and remain China’s largest source of employment, a key consideration amid elevated youth joblessness.

The tertiary sector accounted for more than 48% of jobseekers aged 16 to 24, according to China’s 2020 census.

Skepticism and calls for deeper reform

Despite the policy push, economists cautioned that boosting services alone may not be enough.

The success of the plan depends on addressing deeper structural issues, including household incomes and social welfare.

Boosting consumption requires “restoring consumer confidence to free up high saving rates,” said Ludovic Subran, chief investment officer at Allianz in a CNBC report.

Rebalancing toward domestic demand will also require “giving jobs, time and income to consumers,” he said.

“If the government were to invest more in social services, households would feel safer and be more likely to spend more liberally,” said Logan Wright, a partner at Rhodium Group.

Final consumption expenditure accounted for 56.6% of China’s GDP in 2024, up from 49.4% in 2010, but still far below levels in the US, UK, and Japan.

Economists said it would take years for gains in services consumption to offset declines in property activity, suggesting weak domestic demand may continue to weigh on prices in the near term.

The post China to bet on services to make consumers spend again, will it be enough? appeared first on Invezz