China’s Consumer Economy: The Next Phase of Competition, Part 3
Dive into the story of China’s consumer economy—where it stands today, how demand is shifting, and what it means for future growth and economic stability—in the final part of this three-part series.
By Leigh Wedell, Chynna Hawes, and Ruihan Huang
May 11, 2026
As the United States and China seek greater stability in what will remain a fraught relationship, identifying economic issues that can serve as practical anchors will matter. One that has been largely overlooked in this context is China’s need to strengthen consumer demand, an issue where incentives intersect in ways that are both bilateral and global.
In this three-part series, we examine where China’s consumer economy stands today, how demand is shifting, and where more targeted progress could help unlock the next phase of growth.
the brief
This March, China’s leadership set a GDP growth target of 4.5–5 percent for 2026, one of the lowest in decades and a signal of a continued transition toward a more consumption-driven model. That shift has long been a policy priority, but it is becoming more urgent as traditional drivers of growth, like exports, face headwinds.
Across this series, we have argued that consumption is not just a domestic issue for China, but one with global implications. A stronger Chinese consumer would support global growth and contribute to a more balanced economic relationship.
U.S.-China economic discussions are taking place in a more competitive and deliberately constrained environment, with a focus on tariffs, export controls, and other tools designed to manage strategic risk. That approach is unlikely to change. But even within a more competitive framework, there are areas where economic incentives overlap and where more targeted progress is possible.
The current approach of tariffs and targeted purchase agreements has reshaped trade flows, but has not addressed the underlying imbalance. Commitments to increase imports, often concentrated in categories such as agricultural products, can deliver short-term gains, but are narrow in scope and easily adjusted based on how the political winds are blowing.
Meanwhile, China’s overall trade surplus has reached record levels even as bilateral trade with the United States has declined. In effect, trade has been redirected rather than rebalanced, with other markets absorbing the shift. A more consumption-driven China would offer a more durable and widespread path to rebalancing by supporting broader-based import demand rather than relying on episodic, sector-specific purchases.
The constraints outlined in our previous analysis make clear that consumption will not accelerate on its own. The question is not simply whether Chinese households are willing to spend more, but whether the systems and policy environment give consumers confidence and allow new areas to scale.
The implication is practical: if governments are serious about shifting the economic relationship in a more durable direction, consumption is one of the few areas where economic incentives at least partially align. This also suggests a more focused agenda for companies, particularly those positioned to benefit from a more consumption-driven China, to shape discussions around the conditions needed to support that shift. The challenge is identifying where progress is both economically meaningful and politically feasible.
The breakdown
Where to Focus: Targeted Areas to Unlock Consumption
Not all parts of the consumer economy are equally positioned to drive the next phase of growth. The most relevant opportunities sit at the intersection of demographic demand, structural gaps, and policy priorities.
The Silver Economy: A Structural Demand Gap
Beijing, China (Unsplash/zhang kaiyv)
China’s aging population is one of the most significant drivers of future consumption, and one of its largest unmet needs. More than 300 million people are over the age of 60, and that number will continue to rise over the next decade.
Yet the systems that support aging remain underdeveloped. Institutional care capacity is limited, and the majority of elder care is still provided by families. Healthcare services, long-term care, and age-related support systems are uneven in both quality and availability.
This gap is increasingly the focus of policymakers. President Xi Jinping is actively promoting the development of its “silver economy,” including expanding eldercare and healthcare services, and has signaled openness to private and foreign investment in these areas. The opportunity is broader than institutional care. It extends across healthcare delivery, pharmaceuticals, medical devices, home-based care, insurance, and age-related services. These are areas where demand is rising, and capabilities are still developing. At the same time, foreign participation remains shaped by licensing requirements, pilot programs, and sector-specific constraints.
Household Financial Confidence: Unlocking Spending Power
China’s high savings rate reflects not only cultural preferences, but also structural constraints. Household wealth remains heavily concentrated in bank deposits and real estate, with limited participation in capital markets.
China has taken steps to broaden access, including allowing greater foreign participation in investment banking and asset management. But these openings remain uneven, and in many cases, slow to translate into meaningful scale.
For China, strengthening capital markets is central to its own economic objectives. Expanding pension systems, improving investor protections, and deepening financial markets would give households more confidence to shift from savings to consumption over time.
At the same time, there are areas where more targeted progress on market access could reinforce this shift and open more access for foreign firms. Advancing licensing approvals in consumer financial services, expanding the role of foreign firms in wealth and pension products, and creating more consistent pathways for participation would help broaden the range of investment options available to households. The opportunity, then, is not a single reform, but a more consistent alignment between China’s domestic financial development goals and the scope for external participation.
Expanding the Services Economy: Creating Channels for Consumption
Consumption does not increase in a vacuum—it depends on the availability of services where households can spend. While China’s services sector is expanding, it remains underdeveloped relative to advanced economies.
Again, this reflects both structural and policy constraints. In some areas, including advanced technology and data-intensive services, both China and the United States are moving toward greater restriction. In others, such as media and entertainment, sensitivities remain high.
At the same time, there are areas of more practical opportunity. Consumer-facing services such as healthcare, tourism, and certain financial services are seeing strong demand and align with China’s domestic priorities.
However, realizing that potential would require a more sustained effort to address sector-specific regulatory and legal constraints, including licensing requirements, ownership limits, data rules, and approval processes that continue to shape participation.
Cupping therapy (Unsplash/Jakub Klucký) Shaping the Agenda: What Companies Should Do Now
Consumption offers a more practical area of focus. It is already a priority for China, driven by domestic economic needs, particularly the need to sustain growth and rebalance its economy. For the United States and other global economies, a more consumption-driven China would support broader-based demand and contribute to a more balanced trade relationship.
This does not imply broad-based alignment or a shift in the competitive nature of the relationship. Structural reforms will remain complex, and in many sectors—particularly those tied to national security—access will continue to be constrained.
But within that reality, consumption stands out as one of the few areas where economic incentives overlap in a meaningful way. The opportunity is not sweeping reform, but targeted progress in sectors aligned with China’s own priorities and where expanded participation is commercially viable.
This creates an opportunity for companies—particularly those with exposure to consumer-facing sectors—to shape a more focused agenda. Firms are well positioned to make the case—both in Washington and Beijing—that strengthening consumption is not only economically beneficial, but also aligned with existing policy objectives. That includes advocating for practical, sector-specific steps that expand participation, improve market access, and support the systems needed for consumption to grow.
Emerging proposals to establish more structured channels for U.S.-China economic coordination—such as a potential “Board of Trade”—underscore the direction of travel: a more managed, issue-specific approach to the relationship. If these mechanisms take shape, they are likely to focus initially on transactional areas such as trade flows and supply chains. But they also create a timely opportunity for companies to push for a more structured focus on consumption, particularly in sectors where expanded participation would support both China’s domestic objectives and broader economic stability.
A stronger Chinese consumer will not resolve all trade imbalances. But it represents one of the few areas where incremental progress is both economically meaningful and, in some cases, politically feasible.
keep reading
Discover parts 1 and 2 of the three-part series, China’s Consumer Economy: The Next Phase of Competition
Published by Basilinna Institute. All rights reserved.
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