China to Boost Domestic Demand Amid Sluggish Consumption and Investment: "More Proactive Fiscal Policy"

"Reaffirming the Commitment to Strengthening the Domestic Market by Promoting Consumption"

Lan Fo'an, China's Minister of Finance, stated that a more proactive fiscal policy will be implemented in 2026, according to reports from the South China Morning Post (SCMP) and others on the 28th (local time).

On the 25th (local time), a citizen was taking photos on the streets of Beijing, China. Photo by AFP

Minister Lan made these remarks during the annual National Fiscal Work Conference, which was held over two days starting the previous day. He said, "We will actively promote consumption and expand effective investment to solidify the domestic market." He also added, "China will continue the proactive fiscal policy first introduced last year," and stated, "We will increase fiscal spending, including support for large-scale consumer goods trade-in programs."

SCMP analyzed that Minister Lan's comments suggest China is prepared to tolerate a certain level of fiscal deficit, debt, and spending to ensure stable growth. Regarding the direction of China's proactive fiscal policy, SCMP reported, "Until now, funding has primarily been allocated to infrastructure investments such as bridges, railways, and airports. However, there are now calls for funds to be directed toward education, public health, social welfare, and improving the living standards of low-income groups." SCMP further noted, "The authorities have responded to these calls by adopting a framework for the next five-year plan that closely integrates investment in physical assets with investment in human resources."

Earlier, on the 15th, Qiushi, the Communist Party of China's theoretical journal, published excerpts from President Xi Jinping's speeches over the past decade under the headline "Expanding Domestic Demand Is a Strategic Move." In the article, President Xi stated, "Final consumption is the continuous driving force of economic growth."

Within China, there is growing analysis that a more proactive fiscal policy is inevitable, given that consumption and investment sentiment remain significantly subdued despite the authorities' efforts. In fact, according to data from the National Bureau of Statistics of China, last month's retail sales growth rate was only 1.3% year-on-year, falling behind the 2.9% increase recorded in October and marking a slowdown for the sixth consecutive month.