Promote a positive interaction between consumption and investment
The Fourth Plenary Session of the 20th Central Committee of the Communist Party of China emphasized "adhering to the strategic basis of expanding domestic demand" and explicitly proposed "promoting a positive interaction between consumption and investment, supply and demand". The Central Economic Work Conference to be held at the end of 2025 will conduct an in-depth analysis of the current economic situation and determine "adhering to the leading role of domestic demand and building a strong domestic market" as the top of the eight key tasks for economic work in 2026. Consumption and investment are important components of a complete domestic demand system. Effectively promoting a positive interaction between the two is necessary to enhance the endogenous driving force and reliability of the domestic circulation, and is also a key lever for implementing the strategy of expanding domestic demand.
Dialectical view of the relationship between consumption and investment
At different stages of economic development, the focus of economic policies will be adjusted according to the times and circumstances, and the status and role of consumption and investment will also dynamically change. However, this does not mean that boosting consumption and expanding investment are a simple substitute relationship of either or, one losing and the other growing. From the perspective of a complete domestic demand system covering production, distribution, circulation, consumption, and investment reproduction, consumption and investment are not mutually exclusive, but complementary and mutually empowering.
Consumption is the ultimate goal and intrinsic driving force of investment. The ultimate goal of investment is not the investment behavior itself, but to form production capacity, provide products and services, meet consumer demand, and achieve investment returns. Consumer demand signals provide clear direction and expected returns for investment, serving as an important basis for investment decisions by business entities. They are also the key to solving investment inefficiencies and achieving a virtuous cycle in the national economy. Investments that deviate from consumer demand are prone to blind expansion and overcapacity. The optimization and upgrading of consumption structure drives investment to extend towards high value-added and high-quality fields, and the continuous emergence of new consumer demands will also stimulate new investment tracks, thereby guiding the transformation of investment structure.
Investment is the fundamental prerequisite and support for consumption. Investment determines the supply capacity, income base, and carrier form of consumption, and the realization and upgrading of consumption are always based on the industrial system and infrastructure formed by investment. From a production perspective, by expanding effective investment, we can continuously increase the supply capacity of high-quality consumer goods and services, enhance supply-demand adaptability, and further unleash consumption potential. From the perspective of income, investment helps to promote residents' income growth and form stable consumption support by expanding production and creating more employment opportunities. From the perspective of carriers, continuous improvement of urban and rural consumption facilities through investment can enhance the accessibility, convenience, and comfort of consumption, continuously nurture new consumption scenarios and models, and expand the space for consumption demand. The impact of investment on income, employment, and other aspects will continue to propagate along the industrial chain, resulting in a wider multiplier effect.
Understanding the Significant Significance from Three Dimensions
The advantages and characteristics of a major country's economy lie in domestic demand as the dominant factor and internal recyclability. Promoting consumption and investment to work together and promote each other at a higher level is of great practical significance for economic and social development.
The profound consideration of firmly grasping the initiative of development. Currently, the global economic recovery is weak, and external environmental uncertainty is increasing. In this context, based on the advantages of a super large market and relying on the dual coordination and aggregation of consumption and investment, not only can we effectively release the potential for domestic demand growth and cultivate the development of new quality productivity, but we can also hedge against external shocks and alleviate the downward pressure brought by the contraction of external demand. In extreme cases, it can also provide important guarantees for stabilizing China's economic fundamentals and maintaining overall social stability, laying a solid foundation for firmly grasping the initiative of development.
Strategic choices for building a new development pattern. From international experience, when a country enters the second half of industrialization and urbanization, as the investment rate shows a downward trend, economic development will inevitably shift towards more new models driven by domestic demand and consumption. Currently, insufficient effective demand remains a prominent contradiction in the operation of China's economy, especially in terms of consumption shortcomings, and the endogenous growth momentum needs to be strengthened. Promoting a positive interaction between consumption and investment is not only the core lever and key path to smooth the domestic circulation, but also helps to promote the smooth circulation of the domestic economy, enhance the resilience and reliability of the domestic circulation, and provide demand support for China to rely on the unified national market to gather global high-quality production factors and shape new advantages in international competition and cooperation.
The inherent requirement of practicing the people-centered development philosophy. China has entered a stage of high-quality development, and the people's aspirations for a better life have shown personalized, diverse, and multi-level characteristics. Effective investment around better meeting the needs of the people for a better life can not only continuously enrich consumer supply categories, optimize consumer infrastructure conditions, stimulate new products, new business models, but also enhance the adaptability of product and service supply and demand, continuously enhancing the sense of gain, happiness, and security of the people.
There is still a lot of room for expansion and quality improvement
Since the new era, the scale of consumption and investment in China has steadily expanded, and the fundamental role of consumption and the key role of investment have been further enhanced. From 2012 to 2025, the annual average contribution rate of domestic demand to economic growth exceeded 91%, becoming the driving force and stable anchor for economic growth. However, it should also be noted that China's economic operation still faces the contradiction of strong supply and weak demand, and it is urgent to fully unleash the huge potential of consumption and investment, and promote a positive interaction between the two.
From an international comparison perspective, China still has significant room for improvement in both investment and consumption. Currently, China's per capita capital stock is less than half of that of developed countries, and there is still vast space and enormous potential for expanding effective investment. On the consumer side, the consumption rate of Chinese residents is only about 40%, which is not only far below the level of about 70% in high-income economies, but also lower than the world average of about 56%. At present, China's per capita GDP has exceeded 13000 US dollars, and residents' consumption is in a stage of upgrading towards development and quality. The expansion of consumption scale and the improvement of quality are the trend. It can be foreseen that in the future, multi-level, high-quality, and diversified consumption demand will grow rapidly.
From a domestic perspective, China's economic foundation is stable, with many advantages, strong resilience, and great potential. The supporting conditions and basic trends for long-term improvement have not changed. Although the current promotion of a positive interaction between consumption and investment faces practical constraints such as a structural shortage of high-quality supply and a low proportion of disposable income to GDP, most of these are problems in development and transformation that can be completely solved through efforts. At present, China's total savings rate is around 43%, far higher than major developed countries in Europe and America. The huge savings scale has great potential to transform into effective investment, which can provide strong support for promoting a positive interaction between consumption and investment.
Promote the formation of a higher level of dynamic balance
During the 15th Five Year Plan period, we need to coordinate the promotion of consumption and investment, adhere to the dual pronged approach of consumption and investment, and promote interaction and coordination, to promote the formation of a higher-level dynamic balance of demand driven supply and supply creating demand, and to form more economic development models led by domestic demand, consumption driven, and endogenous growth, in order to achieve a virtuous cycle of the national economy.
Find the correct direction of force application. Focusing on improving investment efficiency, seeking the integration point between investment and consumption, expanding effective investment in consumer infrastructure, improving consumer service functions, and promoting new forms and models of consumption, better promoting the close integration of investment in goods and investment in people. Using new infrastructure as an important link between consumption and investment, we aim to solidify the underlying foundation of new business investment. Taking scenario innovation and optimization of consumer infrastructure as the starting point, we will promote the transformation of offline business entities into scenario based, experiential, interactive, and comprehensive consumption carriers, and promote investment to better empower consumption upgrading. Strengthen the construction of county-level commercial system and promote the extension of consumer infrastructure to communities and rural areas.
Establish sound institutional mechanisms. Integrate cross disciplinary data resources, timely grasp the dynamic needs of residents in education, healthcare, elderly care, consumption and other fields, and use them as important references for government investment decisions and guiding social capital investment. Establish a sound public participation mechanism for investment decision-making in public projects, and expand participation channels through various forms such as public solicitation of opinions, questionnaire surveys, and hearings. In the early stage of demonstration for infrastructure and public service projects, attention should be paid to assessing the driving effects of investment projects on residents' employment, income levels, and consumption capabilities, and using them as an important basis for the feasibility study approval of investment projects. Optimize the redistribution and adjustment mechanisms such as taxation and transfer payments, continuously narrow the income gap, expand the middle-income group, and increase the proportion of residents' income in the national income distribution. Improve a multi-level social security system that covers the whole population, coordinates urban and rural areas, is fair, unified, and sustainable, further weave a dense social security safety net, and make residents dare and willing to consume.
Form a policy synergy. Strengthen the coordination of fiscal, taxation, finance, industry, investment and other policies, promote joint efforts, and build a policy system that is more conducive to promoting positive interaction between consumption and investment. Increase the effectiveness of the central budget investment, super long term special treasury bond, local government special bonds and other funds and new policy financial instruments, continue to improve the quality and efficiency of financial services, actively support the construction of projects in education and health care, skills training, pension care, culture, tourism and sports, supplement the weakness of public services, and promote the construction of new consumption formats, new models and new scenarios. Further optimize the policy of exchanging old for new consumer goods, accurately adapt to the upgrading needs of residents' consumption, and better unleash the potential of domestic demand.
(Source: Economic Daily Author: Wu Youhong Author: Director and Researcher of the Innovation Investment Research Office of the Investment Research Institute of the National Development and Reform Commission)