What: China prioritises consumer spending over technology development in its 2025 economic strategy, introducing a YEN 300 billion stimulus package to boost domestic consumption.

Why it is important: This strategic pivot reflects China's recognition that balanced economic growth requires stronger domestic consumption, particularly as household spending remains 20 percentage points below global averages and international trade tensions persist.

China's government has announced a significant shift in its economic priorities for 2025, elevating consumer spending above technology and industrial production in its national agenda. Premier Li Qiang's parliamentary report outlined a "special action plan" to boost consumption and domestic demand, supporting a target of roughly 5% growth. This strategic reorientation is evidenced by the term "consumption" appearing 31 times in the report, compared to 28 mentions of "technology." The government plans to issue ultra-long special treasury bonds valued at 300 billion yuan to support an expanded trade-in scheme for various consumer goods. This initiative represents a departure from previous hesitancy to implement direct consumer stimulus measures. The policy shift addresses a significant imbalance in China's economy, where household spending comprises less than 40% of annual economic output, approximately 20 percentage points below global averages. While technology remains important, particularly in areas like AI and quantum computing, the focus has clearly shifted towards encouraging consumer expenditure.

IADS Notes: This policy shift builds upon evolving retail trends in China, where January 2025 data showed retail sales reaching YEN 44.2 trillion alongside 230 million consumers embracing AI-powered retail solutions. The transformation of retail spaces, with major cities allocating 16% to entertainment zones, demonstrates the market's readiness for increased consumer focus. Early 2024 performance showed promising signs with a 5.5% year-on-year increase in retail sales and 15.3% surge in online transactions, while December 2024 data revealed stronger growth in rural areas, suggesting the potential effectiveness of these new consumer-focused policies.

China shifts focus to consumer spending over technology amid economic concerns