Domestic demand forecast to be main growth driver in 2026

China's consumption-boosting measures are showing encouraging results this year, particularly in consumer electronics and services, a leading Chinese economist said, as policymakers pay vital attention to domestic demand amid property sector adjustment and rising external uncertainty.

Su Jian, a professor at the School of Economics at Peking University made the remarks on Thursday at a media briefing hosted by the All-China Journalists Association, responding to a question from China Daily on the effectiveness of policy packages rolled out by central and local authorities to stimulate consumption.

Su said consumption growth has been most visible in services and fast-evolving electronic products. "As the economy develops, people's consumption of services will definitely continue to increase," he said, citing tourism, cultural products, sports activities and concerts. Consumer electronics also retain potential, he added, due to rapid product upgrades and replacement cycles.

Su noted that the Ministry of Commerce and local governments have introduced a range of supportive measures, including the "Shopping in China" initiative, to extend a long-standing policy approach. "Since 1997, China has continuously worked to expand consumption," Su said, adding that measures introduced over the past two years have delivered "relatively good results".

Consumption will remain central as domestic demand becomes the main growth driver this year, Su said, describing macroeconomic regulation as an incremental process. "Macroeconomic policy works by first introducing measures and then seeing whether they are sufficient," he said. "If they are not enough, more policies will be added."

At the macro level, Su said China continues to face a structural imbalance of strong supply and weak demand, a condition he described as common across market economies rather than unique to China. He noted that China has addressed this imbalance repeatedly through demand-expanding policies over the past two decades.

Citing rising global uncertainty and weaker external demand, Su said reliance on domestic demand — with consumption at its core — has become increasingly important.

Turning to growth expectations, Su said China's 2026 economic growth target is likely to remain around 5 percent, based on the logic used in recent government work reports, though no official figure has been announced. The final target is expected to be confirmed at the two sessions in March — the annual meetings of China's top legislature and political advisory body.

He said recent target-setting has balanced three considerations: stabilizing employment and incomes, respecting the economy's growth potential and support conditions, and aligning short-term performance with longer-term goals of basically achieving socialist modernization by 2035.

On real estate, Su said China's property sector is undergoing structural adjustment rather than a cyclical downturn after decades of rapid expansion driven by development and construction. With per-capita housing conditions having improved significantly, he said there is limited room for further volume growth.

"Even in developed economies, real estate remains a pillar industry," Su said. "After adjustment, China's property sector will still be an important driver, but its structure will be different."

Future momentum is likely to come from renovation, urban renewal and related services rather than large-scale new development, he said, adding that no single emerging industry will fully replace the role which real estate once played.

Looking ahead, Su said China's economic strategy at the start of the 15th Five-Year Plan (2026-30) period is shifting toward greater emphasis on "investment in people", as returns on traditional infrastructure-led growth fall.

"China's infrastructure is already quite sound," Su said. "Under these conditions, continued investment in physical assets will naturally see declining marginal returns."

Sustaining growth, he said, will increasingly depend on technological progress, which in turn relies on human capital. "What can offset diminishing marginal returns is technological progress," Su said. "And technological progress is created by people."

The Central Economic Work Conference in December called for better coordinating investments in physical assets with investments in people.

The meeting emphasized "investing in people" as a key economic strategy for 2026, shifting focus from just physical assets to human capital, meaning greater spending on healthcare, education, childcare and social services to boost consumption, improve livelihoods and foster innovation-driven growth, aligning with building a strong domestic market and upgrading economic structure.