China's Plan to Unlock Domestic Consumer Power

China is launching a major push to build a unified national market, a strategic pivot designed to unleash domestic consumption and power its next phase of growth, a top economic official announced.

Speaking at an Asia-Pacific Economic Cooperation (APEC) meeting in Shanghai, Vice Finance Minister Liao Min outlined the country's plan to shift toward new, demand-driven growth drivers. This move comes as economies across Asia navigate a "pivotal juncture" in the global economic landscape.

"We are pressing ahead with building a unified market to further unleash domestic demand and consumption potential," Liao stated, highlighting that services consumption is already showing strong momentum. "The Chinese economy will be increasingly demand-driven."

Why the Old Export-Led Model Is Breaking Down

This strategic shift addresses growing unsustainability in China's economic model. While the country met its 5% growth target last year, the expansion was lopsided. Exports accounted for a third of the growth, while domestic demand remained sluggish.

This reliance on exports is becoming increasingly precarious amid rising global protectionism. Internally, the model has fueled issues like industrial overcapacity and prolonged price wars, which have intensified trade tensions with global partners. Beijing has now officially designated boosting domestic demand as its top economic priority for the year.

Dismantling Barriers to Fuel Consumption

The core of the new strategy involves dismantling long-standing local protectionism and inter-provincial trade barriers. Chinese authorities have repeatedly identified these internal obstacles as key factors that suppress consumption and distort the market.

To reassure trading partners concerned about a flood of Chinese goods, the government also announced it will cancel or reduce tax rebates on hundreds of products, including solar cells and batteries, starting April 1. This measure is part of a broader effort to manage excess manufacturing capacity.

Recent Stimulus and Policy Support

In support of this new focus, Chinese authorities have already rolled out several targeted measures to stimulate consumption and investment. These initial steps include:

• Public Spending: An initial plan worth US$51 billion (RM200.56 billion) for investment in key national projects.

• Consumer Subsidies: Financial support for a consumer goods trade-in program.

• Monetary Easing: The People's Bank of China delivered a 25-basis-point cut to interest rates on its structural monetary policy tools.

• Credit Incentives: The Ministry of Finance unveiled a series of loan perks to encourage borrowing by both businesses and consumers.

Navigating Domestic Headwinds and Global Risks

Despite these efforts, significant challenges remain. There is growing expectation that Beijing will lower its national economic growth target this year, reflecting entrenched deflation, a multi-year housing slump, and weak corporate and household confidence.

Concerns over debt risks and thinning profit margins at banks will also likely prevent policymakers from deploying more aggressive, large-scale stimulus. This cautious sentiment is already being reflected at the local level, with over a dozen Chinese provinces reducing their economic growth targets for 2026 after President Xi Jinping signaled greater tolerance for slower expansion and warned against wasteful investment.

In his speech, Liao acknowledged the complex global environment, citing ongoing volatility, rising geopolitical tensions, and supply-chain disruptions. However, he emphasized that the Asia-Pacific remains one of the world's fastest-growing regions, with technology and digital transformation unlocking tremendous economic potential despite "persistent headwinds."