Policies, inbound tourism spurring growth in consumption

China's push to expand domestic demand and improve its business environment will increasingly converge, as policymakers seek to anchor growth in consumption while maintaining the country's appeal to foreign companies amid global uncertainty, said a foreign economist.

John Quelch, executive vice-chancellor, American president and distinguished professor of social science at Duke Kunshan University in China, said a key driver of consumption growth has been the rebound in inbound tourism, supported by visa-free entry policies that have significantly increased both the number of foreign visitors and their average length of stay.

"This has delivered a direct boost to service sector spending, particularly in hotels, restaurants, airlines and travel services, while also stimulating demand for consumer goods," said Quelch.

Many foreign visitors, especially those from developing economies, are able to access a broader range of products in China at prices that are more competitive than in their home markets, he said, adding that recent improvements in foreigners' access to mobile payment systems such as Alipay and WeChat Pay have further lowered transaction barriers and encouraged everyday spending.

These trends have been reinforced by policy initiatives aimed at positioning China as a more internationally friendly consumption destination.

China launched the "Shopping in China" initiative in April 2025, aiming to create an internationally friendly consumption environment and enhance the country's appeal as a consumption hub through measures such as streamlining visa procedures and improving departure tax refund arrangements, as well as making digital payment systems more accessible to overseas visitors.

Quelch said that foreign companies also stand to benefit on multiple fronts. International hotel groups and other service-sector players gain from rising visitor flows, while companies selling premium and branded goods benefit from stronger cross-border consumption, as some products are either unavailable or substantially more expensive overseas.

"In addition, inbound tourism supports employment in China's service industries and, in turn, lifts household incomes and domestic spending," he said.

According to information released by the National Development and Reform Commission last month, the government is studying measures to stabilize employment and create more jobs while improving employment quality, alongside pushing initiatives to advance urban-rural income growth plans.

The goal is to enhance the spending power of consumers while better aligning the supply of goods and services with evolving demand.

As the government's trade-in programs for high-quality durable goods, especially electric vehicles, have also played a constructive role in contributing to economic growth, Quelch said that rapid technological innovation is able to shorten replacement cycles, and policy incentives can encourage consumers to bring forward purchasing decisions.

However, such programs also draw demand forward, making policy continuity important to avoid abrupt fluctuations once incentives are withdrawn, said the economist.

China's government-backed consumer goods trade-in programs benefited 366 million purchases in 2025, boosting product sales worth a total of 2.61 trillion yuan ($375 billion) in value, data from the Ministry of Commerce show.

Highlighting that confidence remains the most decisive factor shaping spending behavior for domestic consumers, Quelch said that while China's relative macroeconomic and social stability compares favorably with the volatility seen elsewhere in the world, concerns over long-term costs, particularly healthcare, continue to encourage precautionary saving.

Greater public investment in healthcare services, he said, would reduce uncertainty for households, stimulate spending in the healthcare sector itself and, more broadly, encourage consumers to allocate more income toward discretionary consumption.

Liliana Lucioni, president for China at Coach, a US-based luxury brand, said that China's latest policy measures to drive consumption underscore the long-term potential and strengths of the Chinese market and provide a stable and predictable development environment for global companies.

"We will add 100 new stores in China between 2026 and 2028, extending our presence to more than 100 cities and serving local consumers and foreign visitors in ways that better reflect their needs," she said.