China’s State Council recently issued the 15th Five-Year Plan for Expanding Consumption (henceforward “Plan”) in the form of an official approval. The Plan outlines the targets and pathways for the development of the consumer market, while establishing a strategic framework and orientation for the layout and evolution of consumer demand and supply across various aspects. This is a systematic design for policies aimed at encouraging consumption, establishing a policy framework and implementation path for market development and expansion across six major dimensions, namely services consumption, goods consumption, new formats and models, household consumption capacity, the consumption environment, and institutional mechanisms. The establishment of this long-term plan not only indicates the sustained nature of policies to expand consumption, but also reflects a shift in the primary driver of economic growth from investment to end-user consumption. This aligns with the policy rationale proposed by ANBOUND that consumption requires a long-term perspective.
In terms of overall targets, the Plan proposes that by 2030, the overall scale of China’s consumer market will continue to expand, the household consumption rate will increase significantly, overall consumption of goods and services will grow relatively rapidly, total retail sales of consumer goods will reach approximately RMB 60 trillion, and the driving role of consumption in economic growth will be further strengthened. At the same time, it also highlights a more optimized consumption structure, continuously improving consumption capacity, enhanced quality of consumer supply, marked improvements in the consumption environment, and the further refinement of institutional mechanisms to promote consumption. It can be seen that the continuous expansion of consumption scale remains the most fundamental requirement among the targets, accompanied by a specific figure for total retail sales of consumer goods, i.e., RMB 60 trillion. However, in the view of the researchers at ANBOUND, achieving this aggregate target will likely be no easy task.
With total retail sales of consumer goods surpassing RMB 50 trillion in 2025, reaching this target would require an average annual growth rate of approximately 3.72% in retail sales. During the 14th Five-Year Plan period, the compound annual growth rate of total retail sales of consumer goods was approximately 5.5% to 5.6%, significantly higher than the target set in the 15th Five-Year Plan. This indicates that policymakers have recognized a trend of decelerating annual retail sales growth. Although the scale continues to expand, the underlying momentum for goods consumption is becoming increasingly weak. Given the share of consumption in the broader economy, this also implies that economic growth in the country will face a long-term trend of steadily slowing growth rates in the future.
Even so, achieving the targets of this five-year plan may still prove challenging. In fact, total retail sales of consumer goods have failed to achieve the corresponding growth rates in recent years. In 2025, China's total retail sales of consumer goods surpassed RMB 50 trillion for the first time, reaching RMB 50.1202 trillion, a year-on-year increase of 3.7%; in 2024, total retail sales reached RMB 48.7895 trillion, up 3.5% from the previous year. As the opening year of the 15th Five-Year Plan, 2026 presents an equally challenging outlook. In the first half of this year, total retail sales of consumer goods and services grew by 2.7% year-on-year, with service retail sales rising by 5.3% while goods retail sales increased by just 1.1%. In May, monthly retail sales growth even contracted by 0.6%, before recovering to 1% in June. Taking inflation into account, nominal growth may remain positive, but a significant gap remains between current retail sales growth and the annual growth target of 3.72%.
At the same time, although current inflation levels have seen a modest recovery, they remain low. In a near-deflationary environment, driving goods consumption to achieve the target will require an improvement in price levels. In other words, expecting to achieve goods consumption targets by "trading price for volume" is not a fully viable approach. While lower prices may boost consumer demand, the trade-off between price and volume is unlikely to drive an increase in total consumption expenditure. A more likely outcome, as ANBOUND previously warned, is the formation of a vicious cycle of falling prices, contracting profits, constrained wage growth, and slowing consumption growth. Achieving the planned retail sales target will be no simple matter. It is neither possible to rely blindly on price wars nor to expand capacity indiscriminately on the production side. Rather, a balance must be struck between volume and price. As it stands, the expansion of the goods consumption market still depends on income growth supported by economic fundamentals, which is precisely why ANBOUND has consistently advocated for a long-term approach to consumption policy.
As for specific components of goods consumption, structural shifts are currently underway. Certain traditional consumption sectors are entering an era of stock optimization. Growth in real estate-related sectors, such as home appliances, home decoration, and building materials, lacks momentum. At the same time, bulk consumption like automobiles has contracted. This indicates that under the current situation of "strong supply and weak demand", the underlying logic of goods consumption has experienced major changes. Incremental consumption growth lies in new consumption and new demand, as well as in efficiency gains and quality improvements within stock competition, alongside the relaxation of various demand-side constraints. Hence, achieving future targets for total retail sales will depend on consumption transformation and tapping into new demand, rather than mere scale expansion. This implies that reliance on traditional stimulus measures, such as "consumer vouchers" or "consumption subsidies", is unlikely to generate sustained long-term consumption momentum. Meanwhile, unlike previous emphases on the "healthy development of the platform economy," this consumption plan excludes online consumption and the platform economy. This reflects the increasingly pronounced negative impact of intense competition within the platform economy on direct goods consumption, as well as its drag on consumption capacity when it comes to employment and income growth within flexible working arrangements. This means that online platforms and e-commerce can no longer serve as the primary drivers for expanding consumption.
All in all, the foundation for expanding consumption ultimately rests on the long-term variable of consumption capacity. Other than employment and income growth, the Plan mentions structural developments in social security and public services, factors that similarly exert a long-term impact on consumption.
The new Plan does address the issue of property income, touching upon the stabilization of the real estate sector. It affirms the positive role of real estate market stability in expanding related consumption and safeguarding household income, which also bears on the stabilization of property-linked consumption. Regarding bulk automobile consumption, the Plan discusses tapping potential and developing the second-hand car market to revitalize existing stock consumption. However, under conditions of strong supply and weak demand, auto consumption must also factor in price dynamics, as continuous price declines will erode the value of the existing fleet of used cars. Thus, consumption growth is closely tied to the value of existing assets or the value of consumer durables. Under these conditions, as ANBOUND researchers note, the real dividend of consumption growth resides in the incremental economic dividends driven by technological development generated through upgrading and replacement cycles. In this regard, expanding goods consumption is not merely an issue of existing stock, but involves the transition from traditional to new consumption. The focal point for driving real estate-related consumption remains anchored, as emphasized by the central leadership, in new real estate models such as urban renewal and the development of high-quality housing.
In other words, expanding consumption and sustaining growth in goods consumption cannot be achieved simply by distributing funds. Instead, it requires consumption upgrades and iterations that build a new economic development model. While maintaining existing stock, it demands supply-side upgrades and adjustments to unlock new demand. Zhu Keli, founding president of the China New Economy Research Institute, similarly addressed the need for dual effort on both the supply and demand sides. He noted that the plan continuously releases household consumption potential through institutional design, steadily enhancing the driving role of consumption in economic growth. At the same time, the Plan bridges the two-way adaptation channel between supply and demand, guiding industry-side supply innovation on the one hand while unlocking latent household consumption demand on the other. This is intended to resolve long-standing issues such as product and service homogenization and supply-demand mismatches.
Noteworthily, the Plan identifies expanding services consumption as the focal point for internal demand growth. Judging from current trends, service consumption exhibits greater elasticity and represents the area with the greatest potential for growth. In 2025, domestic service-related consumption expenditure accounted for 46.1% of per capita household consumption expenditure, whereas in the United States, this proportion approaches 70%. It is clear that services consumption constitutes the primary space for China's future consumption growth. In the first half of this year, domestic service retail sales grew by 5.3%, outpacing goods retail sales growth by 4.2 percentage points. Furthermore, added value in the service sector grew by 5.2% in the first half of the year, encompassing both producer and consumer services. Compared to the widespread "strong supply and weak demand" in goods consumption, the service sector maintains a mild "weak supply and strong demand" dynamic. Therefore, as the boundaries of goods consumption become increasingly apparent, expanding services consumption is essential to achieving the goal of "further strengthening the driving role of consumption in economic growth". Services consumption currently represents the primary source of incremental consumption growth while goods consumption undergoes "stabilization".
In terms of services consumption, the Plan highlights seven key sectors of lifestyle services, elderly care, childcare, culture and tourism, healthcare, sports, and education and training, among other end-user service retail domains. Unlike basic living requirements such as dining and daily necessities, the content of the Plan reflects a broader demand for service quality enhancements. In fact, service formats in areas such as catering, homestays, and culture and tourism are already experiencing oversupply. Expanding services consumption is not a simple matter of store expansions and capacity growth, but rather an issue of improving supply to match diverse demands. The Plan also emphasizes cultivating new consumption formats, models, and scenarios, leveraging digital technologies and products to enhance digital service consumption and experiential consumption. This reflects a trend toward the integrated, chain-like development of diverse formats, aimed at unlocking various dimensions of service consumption demand with the support of subsidy mechanisms.
It should be noted that the Plan mentions "strengthening full-coverage consumption statistics and optimizing the statistical monitoring of service consumption as well as new consumption formats and models". The intention can be understood as identifying new methods and avenues to incorporate micro-service formats previously excluded from national economic statistics, such as gig economy activities like domestic help and caregiving, into economic statistics, thereby further refining economic data. These micro-formats, previously outside official metrics, would be included in future incremental consumption. Naturally, this is merely a statistical technique for expanding consumption. In the end, the focus should remain on the core development logic of removing constraints, releasing demand, and enhancing supply.
Final analysis conclusion:
As the boundaries of the goods consumption market become apparent, achieving the aggregate targets for goods consumption set out in China’s 15th Five-Year Plan for Expanding Consumption will be no easy task. It will require connecting the supply and demand sides to smooth the economic circuit and unlock demand. The broader space for expanding consumption lies in services consumption, which similarly requires a demand-driven consumption policy framework grounded in a long-term perspective.
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Dr. Wei Hongxu is a Senior Economist of China Macro-Economy Research Center at ANBOUND, an independent think tank.
