Incremental policies open up new blue oceans of consumption

Editor's note: Zhou Jianjun is an assistant researcher at the Institute of State System Research and School of Economics at Zhejiang University. The article reflects the author's opinions and not necessarily the views of CGTN. It has been translated from Chinese and edited for brevity and clarity.

Recently, a comprehensive package of incremental and existing policies introduced by the Chinese government has worked collectively to breathe new life into the consumer market, effectively boosting social confidence and invigorating the market. These incremental policies aim not only to stimulate consumption in the short term but also to support long-term structural adjustments, laying a solid foundation for sustained growth of the consumer market.

The policy package has shown evident results, driven by the dual engines of existing and incremental policies. To vigorously boost consumption and expand domestic demand across the board, the General Office of the CPC Central Committee and the General Office of the State Council issued a plan on special initiatives to boost consumption on March 16. The plan calls for enhanced coordination between fiscal, financial, industrial, and investment policies and consumption policies, to further stimulate the consumer market.

In line with this requirement, the Chinese government has rolled out a series of new incremental measures to work in tandem with existing policies, forming a "dual-engine" model. For example, the "two new" policy (large-scale equipment upgrades and trade-in of consumer goods) introduced in March 2024 set off a new round of large-scale equipment upgrades and trade-in of consumer goods. Based on these existing policies, the "two new" policy has been expanded this year to include subsidies for consumer electronics such as smartphones, tablets, smartwatches, and fitness bands. 

In addition, on April 15, the National Data Administration proposed a digital consumption upgrade initiative to create new scenarios for digital intelligent consumption, which are expected to further boost demand for electronic products like smartphones.  

Expanded incremental policies in 2025 have already delivered notable results, driving rapid growth in the consumption of related products. Again taking the "two new" policy as an example, following the inclusion of smartphones, tablets, smartwatches, fitness bands, and other products in the subsidy scheme, its impact of boosting consumption has been striking. 

In January and February, retail sales of communication equipment by enterprises above the designated size surged by 26.2 percent year-on-year. The sales volume of smartphones priced below 6,000 yuan reached 44.22 million units, with the total sales amounting to 112.6 billion yuan, an increase of 8.8 percent and 19.3 percent year-on-year, respectively. 

As durable goods, smartphones have seen a lengthening replacement cycle in recent years. According to data from iiMedia Research, 51.34 percent of consumers reported replacing their phones every three to four years in 2024, while 12.52 percent waited more than five years. In 2022, these figures were 43.2 percent and 6 percent, respectively. 

Amid weakening consumption willingness and extended replacement cycles for durable goods like smartphones, only strong stimulus policies and attractive subsidies can boost consumption, thus resolving blockages in the production-consumption cycle and injecting new momentum into industrial recovery and growth.

Incremental policy dividends continue to be released, opening up new frontiers for consumption growth. With the implementation of "reciprocal tariffs" by the US, China faces tremendous external risk and mounting pressure to stabilize growth in 2025. In this context, consumption must play a larger role in driving economic growth. 

Stimulated by a series of incremental policies introduced by the Chinese government, such as raising the cap on internet consumer loans for individuals from 200,000 to 300,000 yuan, with loan terms extended from five to seven years, and local governments' introduction of generous subsidies for third-child families, with maximum payouts reaching 100,000 yuan, policy dividends are being unlocked, giving rise to an endless stream of new space and new models for consumption growth. 

In recent years, a range of new consumption scenarios, products, and services have become increasingly familiar and widely accepted among Chinese consumers. These include consumption revolving around winter tourism and ice-and-snow sports; pet-related spending covering food, smart products and specialized services; "goods" spending tied to ACGN culture such as manga and anime; "China-chic" consumption rooted in traditional Chinese culture; low-altitude tourism, aviation sports, and consumer-grade drones; the "silver economy" targeting elderly consumers; and inbound consumption aimed at foreign tourists. These emerging "blue oceans" of consumption have not only provided a short-term boost to household consumption, but also promoted structural adjustments in China's economic growth and consumption upgrading. They mark a shift from traditional, extensive growth to a modern, innovation-driven development model. These advancements help alleviate overcapacity and reduce resource waste, ultimately improving overall economic efficiency.

Revitalizing the consumer market hinges on dismantling three major hurdles holding back consumption. Many Chinese residents today face three major barriers, namely, having "no money to spend" due to insufficient income, being "too anxious to spend" because of heavy external burdens, and having "no opportunity to spend" as a result of busy and exhausting work. These issues must be effectively addressed to drive consumption growth. 

Future incremental policy efforts can be strengthened in three key areas: To address the issue of having "no money to spend", policies must focus on fully ensuring employment, steadily raising household income, and promoting property-based income growth through diversified channels, so that residents have more money for consumption. 

As for being "too anxious to spend", it is essential to improve the social security system, enhance welfare benefits for residents, and ease their burdens associated with children's education, treatment for serious diseases, and elderly care. This will allow people to spend without worrying about future hardships. 

To tackle the issue of having "no opportunity to spend", the practice of the so called "996 work culture" — where people work from 9 am to 9 pm, six days a week, must be curbed. The eight-hour workday and the two-day weekend system should be implemented. 

Additionally, the number of statutory holidays could also be increased, and more flexible leave arrangements could be introduced to facilitate longer breaks, giving residents ample time, better health, and a more joyful mood to engage in consumption.

(Cover via VCG)