2026 is not the year of consumption
Despite steadily growing anticipation among analysts, Beijing is not gearing up to revive household consumption in 2026.
Some context: Over the past week, there’s been a lot of speculation among journalists and analysts that authorities will engineer a consumer recovery this year, because:
- Chinese officialdom has been talking up the importance of consumption
- And domestic demand in Q4 was so weak that authorities must do something
Our reaction: Curb your enthusiasm.
- Looking at the actual policy signals coming out of Beijing, we see continued headwinds for consumption and clear constraints keeping officials from taking action to support it.
First, boosting household spending would require greater state outlays on welfare and public services.
- But that means more debt – and the Party has a deep-seated aversion to funding welfare with debt.
Second, household spending on physical goods is slowing, but spending on services remains robust – which is to be expected at this stage of China’s economic development.
- Beijing thinks spending on services would be even higher, if not for a shortage of services that people really want to purchase.
- Consequently, in 2025 Beijing’s approach to boosting services consumption was to increase investment in services – and we expect more of the same in 2026.
Get smart: There will undoubtedly be more government spending on welfare this year – probably on neonatal policies and aged care – but the modest increase won't meaningfully boost household spending.
Get smarter: Overall, support measures will focus – as always – on supply-side investment and on efforts to create demand for manufacturers. That means more:
- Funds for infrastructure
- Policies that create demand for overcapacity industries – perhaps by requiring firms to use more renewable energy, or policies that push firms to upgrade their plants and equipment
Our take: For the past four years, Beijing's weak actions to boost consumption haven’t matched its more supportive rhetoric.
- We don’t expect this year will be any different.