Domestic demand is the fundamental driving force of China's economic development, expanding domestic demand is the basic starting point to keep the economy growing steadily at a relatively fast pace, and it is also an important part of Xi Jinping's economic thoughts. In the first volume of "Xi Jinping Economic Selected Works", many articles have made profound expositions on expanding domestic demand. For example, "China's Open Door Will Only Get Bigger" points out: "Domestic demand is the basic driving force for China's economic development and is also an inevitable requirement to meet the people's growing need for a better life." "Ensuring that China's Economic Vessel Sails Against the Wind and Far into the Future" points out: "Expanding domestic demand is not only related to economic stability, but also to economic security. It is not a temporary measure, but a strategic move." And so on. At present, the adverse effects of changes in the external environment are deepening, and the uncertainty of external demand is gradually increasing. Expanding domestic demand can help resist external shocks, continuously push China's economy to rebound and improve, and achieve high-quality economic development. It is not only an urgent task for stabilizing growth, but also a strategic choice to adapt to changes in the domestic and international situation, and it is an even longer-term strategy to promote Chinese-style modernization. The Central Economic Work Conference in 2024 put forward "comprehensively expanding domestic demand", and the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council recently issued the "Action Plan for Boosting Consumption". We should take Xi Jinping's economic thoughts as guidance, speed up the implementation of the Party Central Committee's decision-making and deployment on expanding domestic demand, and constantly consolidate the domestic demand base for China'

Seize the consumption potential in the consumption upgrade. In 2024, China’s per capita GDP US$13,000, and residents’ consumption accelerated from the aspects of food, clothing, housing, and transportation to culture, education, health, and entertainment. Engel coefficient of Chinese residents in 2024 has already dropped to 29.8%, but compared with the level of less than 19% in countries, there is still a large downward space, and the released consumption capacity will be filled by services such as culture, education, health, and entertainment. At present, the growth momentum of service consumption in China is very good, and the proportion of national residents’ per capita expenditure on service consumption in 2024 accounted for 46.1 of the proportion of residents’ consumption expenditure, close to the “half of the country” in consumption, and is an important support for the recovery and growth of consumption. It is universal law that the proportion of service consumption increases with the increase of income, and the proportion in developed countries is usually around 60%, which shows that the space for expanding consumption in China is still very large. At the same time, the trend of upgrading commodity consumption in China is also very obvious. For example, in the past two years, the sales growth rate of sports and entertainment goods above the limit is faster than the total retail sales of social consumer goods. In the future period, China’s automobile consumption still has room expand, and will enter the stage of replacement and upgrading. Home appliance consumption has also entered the period of renewal and replacement. Driven by the upgrading of residents’ consumption structure and trade-in policy of consumer goods, the retail sales of household appliances and audio-visual equipment above the limit in 2024 increased by 12.3% the previous year, and it is a general trend for home appliance consumption to upgrade in the direction of low carbon, green, and smart in the future period.
Find consumption from changes in social structure. In 2023, China’s final consumption rate was 56.8%, which still has a gap with the level of 65% in some developed economies at a similar stage of development, and there is still potential for future development. China has the largest middle-income group in the world, as the economy and society develop, it is expected that the size of the middle-income group will reach 700 million people by 2035. The middleincome group constitutes the main consumer group of China’s mid- and high-end goods and services, and higher-quality, better-performing, and more-rich consumption demand grow faster.
Release consumption potential from the ladder-like upgrading of urban and rural regional consumption. In recent years, the growth rate of rural consumer retail sales has been1-3 percentage points faster than that of urban areas, although there have been some changes in the months after the impact of the COVID-19 pandemic, the overall trend has changed, and the growth rate of rural consumer retail sales in 2024 is 0.9 percentage points faster than that of urban areas. At the same time, growth rate of the total retail sales of social consumer goods in the central and western regions is mostly faster than that in the eastern region, and the growth gap in some years is wid, and the consumption growth rate in second and third-tier cities is gradually faster than that in the first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenhen. With the further improvement of the development level of urban and rural regional coordination, there is a new space and potential for consumption ladder upgrading