Featured in the Economist: Can anything get China’s shoppers to spend?

An economic recovery depends on it. Yet a new action plan may not do the job

Installing more lifts in multi-storey buildings, extending the hours of children’s clinics during flu season, encouraging foreign direct investment in camping. These are some of the ideas sprinkled throughout China’s “special action plan” to boost consumption, which was published on March 16th, a Sunday, thus extending the hours of China’s journalists.

The plan was hotly anticipated. News of its imminent arrival helped lift China’s main stock market index by over 2% on March 14th. Officials have long talked about shifting the economy towards consumption and away from investment and exports. Indeed, raising Chinese consumption is something of a white whale for global macroeconomics. But the aim has added urgency now, since other sources of demand are under threat. Investment is still depressed by China’s unending property slump: new home starts fell by almost 30% in the first two months of this year, compared with a year earlier. Exports, which propped up growth last year, face steep American tariffs that could soon rise.

Economists reckon that total consumption—including state spending on things like running schools and hospitals—will have to contribute over 60% of China’s growth this year if the economy is to get close to the official growth target of 5%. Last year it contributed less than 45%.

Shoppers have made a mildly encouraging start. Retail sales grew by 4%, before adjusting for inflation, in January and February compared with a year earlier, according to figures released on March 17th. That was far below the pre-pandemic trend, but still an improvement over December (see chart). During the eight-day Spring Festival holiday, 187m people went to the movies. Many were drawn by the animated epic “Ne Zha 2”, about a plucky demon child who defies his unpromising destiny.

China’s households could do with some of his vim. Their confidence was hit by draconian covid-19 lockdowns and has never recovered. Households still save at a higher rate than pre-pandemic. And more of their saving goes to bank deposits and other financial assets, rather than new homes. The tendency to hoard has led to a bout of secular stagnation, according to Adam Wolfe of Absolute Strategy Research, a consultancy. Consumer prices fell by 0.1% in the first two months of 2025 against a year earlier. Eggs were 1% cheaper.

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