China is accelerating its push toward a consumption-led economic model, with policymakers identifying the expansion of domestic demand as the key driver of GDP growth during the 15th Five-Year Plan period (2026-30), economists and officials said.

Following the tone-setting Central Economic Work Conference, which prioritized domestic demand for 2026, experts noted a strategic transition: China is moving beyond simple volume growth toward "structural optimization". This involves leveraging fiscal tools to boost household incomes and specifically targets the high-growth services sector to buffer against external uncertainties.

An official from the Office of the Central Committee for Financial and Economic Affairs confirmed that Beijing will roll out concrete plans to boost household incomes and raise basic pensions while increasing the supply of high-quality products and services and also removing unreasonable restrictions to fully unlock consumption potential.

Experts see this policy stance as a signal for significant growth in specific areas, and express optimism about the long-term potential of China's consumer market.

Wang Wei, a senior researcher at the Development Research Center of the State Council, said at a recent forum hosted by China News Service: "China's consumption growth maintains strong momentum and ample potential. Emerging areas such as digital services, green technology and health-related demand are expected to become the primary engines of the consumer market."

Official data support this structural divergence. According to the National Bureau of Statistics, retail sales of services climbed 5.4 percent year-on-year in the first 11 months of 2025, outpacing the overall retail growth of 4 percent.

Chen Lifen, a researcher at the DRC, described the current phase as a critical evolution from a goods-dominated model to one that balances goods and services, with a long-term trajectory toward a services-led structure.

"As income levels rise, demand for services, which typically have high income elasticity, naturally increases its share of total wallet spending," Chen said, adding that with basic needs largely met, the "quality upgrade" is driving capital toward personal development, leisure and smart home ecosystems.

The shift is already reshaping corporate investment strategies as companies move to capture these high-quality demand pockets.

Fang Xing, a vice-general manager at Ping An Property & Casualty Insurance, highlighted the surging "pet economy" — now valued at approximately 300 billion yuan ($42.81 billion). With veterinary costs often exceeding 10,000 yuan for major procedures, financial institutions are developing specialized insurance products to hedge these rising household costs.

Similarly, in the manufacturing sector, the focus has shifted from scale to efficiency. Guo Yanhu, a director with Gree Electric Appliances, said consumer demand for green energy is driving research and development. He cited Gree's investment in AI-driven energy systems — which has boosted efficiency by over 25 percent — as a direct response to both domestic eco-targets and demand from overseas markets.

Economists emphasize that sustaining this momentum requires institutional reforms. Su Jian, a professor at the School of Economics at Peking University, said expanding "high-quality demand" requires a virtuous cycle where new products help cultivate new demand, while cost-reducing innovations allow new demand to scale.

While fiscal and monetary policies are essential to expand demand, Su said expanding high-quality demand depends on developing new quality productive forces through product innovation and process innovation.

Luo Zhiheng, chief economist at Yuekai Securities, added that boosting consumption during the 15th Five-Year Plan period is a strategic choice rather than a short-term policy response.

"Key to raising the household consumption rate will be improving income distribution, strengthening social security and widening market access. These are the fundamental levers to converting potential demand into actual economic activity," Luo said.

lijing2009@chinadaily.com.cn