China's efforts to scale up effective investment, with a particular focus on encouraging private sector participation and increasing investment in human capital, will play a key role in boosting domestic demand next year, officials and experts said.

The annual Central Economic Work Conference, held earlier this month, emphasized the need to "halt the decline in investment and promote its recovery" amid a complex external environment.

The government needs to effectively drive investment by making good use of funding sources such as central government budget investments, ultra-long-term special treasury bonds and local government special bonds, Xinhua News Agency quoted an official of the Office of the Central Commission for Financial and Economic Affairs as saying.

"The government will support private firms' participation in major projects in sectors such as railways and nuclear power, and guide private investment toward new fields such as high-tech industries and the service sector," the official said.

The official added that major projects set for the 15th Five-Year Plan (2026-30) period could be front-loaded where conditions permit.

China's fixed-asset investment fell 2.6 percent year-on-year in the first 11 months of the year, according to the National Bureau of Statistics.

China has rolled out a series of targeted policies over the past year, including an 800 billion yuan ($113.8 billion) list of key projects to implement major national strategies and strengthen security capacity in key areas, and 500 billion yuan in new policy-based financial tools to supplement project capital.

The economic agenda-setting meeting also called for greater investment in physical assets and human capital.

From the country's sprawling highway networks and bullet trains to its forest of urban high-rises, investment in physical assets played a crucial role in its economic growth over the past decades, said Yu Chunhai, executive dean of Renmin University of China's School of Economics.

However, Yu noted that the country's incremental capital output ratio, which indicates the amount of capital required for every 1 yuan increase in GDP, increased from 2.84 in 2008 to 9.44 in 2023.

Meanwhile, facing diminishing returns from the old growth model and a global shift toward talent-centric competition, China is placing a strategic bet on investing in people, analysts said.

Investment in human capital refers to inputs that develop people's capabilities and unlock their potential at all stages of life, including childcare, elderly care, health, education and skills training.

An aging population and rising labor costs are eroding the traditional demographic advantage. By prioritizing investment in human capital, China seeks to build long-term economic competitiveness for innovation-driven, demand-led growth, said Chen Wenling, former chief economist at the China Center for International Economic Exchanges.

"A healthier, better-educated and more secure workforce is the most critical infrastructure for the next stage of China's development," Chen said. "Sustained investment in people's capabilities, health and career development doesn't just improve well-being — it directly fuels economic upgrading."

Meanwhile, analysts believe that investing in people could also help unlock the spending power of China's massive population, creating a virtuous cycle in which social investment fuels consumption resilience.

The enhanced investments in pensions, childcare and healthcare are designed to alleviate the precautionary savings burdens that constrain household spending, said Luo Zhiheng, chief economist and head of the research institute at Yuekai Securities.

"This approach transforms social spending into a powerful economic driver. A more secure population is likely to spend more freely," Luo said. "The direction aligns with China's broader economic objectives of rebalancing growth toward high-quality domestic demand."

wangkeju@chinadaily.com.cn