Boosting consumption will be key in 2026

The call by Chinese policymakers to further boost consumption and raise incomes of urban and rural residents signals a stronger demand-side push in 2026 to target consumers' ability and willingness to spend, economists said.

The annual Central Economic Work Conference, which concluded on Dec 11, urged deeper implementation of pro-consumption measures and the rollout of an income growth plan for households. It also called for expanding the supply of high-quality goods and services and removing unreasonable restrictions on the consumption sector to unlock services spending.

Shu Wenqi, deputy director of the China City Development Academy, said the conference signaled a sharper demand-side tilt in macro policy, shifting the focus of growth from traditional investment to a dual push for consumption and incomes. The aim is to systematically raise the ability and willingness of households to spend, thereby strengthening the economy's endogenous momentum over the long term.

He said the policy direction aligns with the recommendations for formulating the 15th Five-Year Plan (2026-30) to "promote common prosperity and increase the share of household income in national income".

The planned income-boosting program for urban and rural residents seeks to build a lasting virtuous cycle of "income growth-consumption upgrades-industrial transformation", rather than just facilitating near-term circulation.

Analysts said they expect that during the 15th Five-Year Plan period, income growth and consumption will sit within a broader structural reform agenda.

Shu said that policymakers are likely to improve primary and secondary income distribution systems and expand the middle-income group to underpin a large domestic market.

In November, the Ministry of Commerce launched the "Big Market for All: Export to China" initiative, aimed at boosting imports and providing a new channel for global products to enter the Chinese market.

According to ministry data, trade-in programs for consumer goods from January to November drove more than 2.5 trillion yuan ($355 billion) in sales, benefiting over 360 million customer visits. Purchases included more than 11.2 million cars, 128.44 million home appliances, 90.15 million subsidized smartphones and other digital devices, 12.91 million electric bicycles, and over 120 million home renovation and kitchen upgrades.

Robin Xing, chief China economist at Morgan Stanley, said that boosting consumption is a key task and aligns with the 15th Five-Year Plan goal of notably raising the household consumption share.

Xing said he expects the trade-in program to continue in 2026, with a similar size of around 300 billion yuan and some shifts in eligible product categories. As marginal effects diminish, he said the policymakers may extend support to services in the second half, though details need to be firmed up. Spending on preschool education and social security could also increase.

The economic conference also reaffirmed the property sector's shift toward higher-quality development. Analysts said they expect supportive measures to continue in 2026 to stabilize the market.

"Mortgage interest subsidies are likely to be expanded next year," Xing said. "But the effectiveness will depend on the scope, strength and duration. We may need to wait until after the two sessions in March for more clarity."

Shu, from the China City Development Academy, said that the potential supportive policies for the property sector in 2026 should not be seen as short-term stimulus. "Rather, they would facilitate a soft landing and model shift during a period of deep adjustment," he said, adding that future measures should build on ensuring housing delivery and safeguarding livelihoods, while advancing a "rent-and-buy" housing supply system and integrating real estate with national strategies such as new urbanization and urban renewal.

He said that local governments should take an integrated approach, linking everyday spending opportunities, better-quality jobs and stronger social safety nets. Key priorities include digital spending, green consumption and services for older adults. The aim, he said, is for cities to be engines of growth and places where people feel their lives are getting better.

Tao Qizhi, a professor at the Southwestern University of Finance and Economics' Institute of Chinese Financial Studies, said the policy tilt works from the demand side by raising incomes, which is aimed at improving the housing price-to-income ratio and adding solid, sustainable end-user demand to the property market.

"This is more than a market backstop. It is meant to push the sector away from its old model of high leverage and scale expansion. The goal is a new phase of high-quality growth centered on people's needs and product quality," Tao said.