Summary of Key Points
To further stimulate domestic demand in the future, we can no longer rely on traditional physical consumption (such as cars and household appliances) because these sectors have nearly reached saturation, and there is an excess of manufacturing capacity. The demand from middle- to high-income groups is shifting towards services such as tourism, culture, and healthcare, which are repeatable and have no upper limit, representing the key to future consumption growth. Additionally, the manufacturing industry can overcome homogenized competition by integrating services (such as leveraging IP rights and adding experiential elements). The prosperity of domestic service consumption can also foster the ability to export these services, helping to balance the trade deficit.
1. Traditional Physical Consumption: From "Bidding to Buy" to "Having Enough," with Growing Limited Growth Potential
In the past, when incomes were low, people lacked clothing, household appliances, and cars, and their desire to purchase these items was strong. However, with basic material needs now met, many physical goods have approached saturation—for example, having two TVs at home means they take up space and are rarely used, which is what economics refers to as the diminishing marginal utility of consumption.
China's manufacturing industry is extremely robust, with an average annual growth rate of 5.5% from 2021 to 2025, accounting for nearly 30% of global production, yet factory capacity was only utilized at 74.4% in 2025, indicating that many factories are not operating at full capacity. Therefore, it is becoming increasingly difficult to drive consumption through increased production of traditional goods. While new energy vehicles and smart homes can create demand, they will not experience the explosive growth seen with the popularization of household appliances. In the future, success will rely on improving product quality and adding value through services.
2. The Money of Middle- to High-Income Groups: No Longer Wanting to Buy "Things," but Rather "Experiences"
Consumption policies cannot be one-size-fits-all. Low-income groups need more income and stable employment, while middle- to high-income groups (with annual incomes above 50,000 to 100,000 yuan) do not lack money; they are looking for "new things worth buying." They already own cars, houses, and smartphones and are unlikely to buy more just because of price reductions. Instead, they prefer to spend on activities like traveling (6.5 billion domestic trips in 2025, a 16% increase), fitness, attending concerts, and pet services. These consumption choices focus on quality rather than quantity—for instance, they want to stay at distinctive homestays during travel, hire personal trainers for fitness, or buy stuffed animals with associated IP stories (like from Pop Mart). Essentially, they are buying "experiences" and "emotional value."
3. Service Consumption: The Future Driver of Consumption Growth
The main difference between service consumption and physical consumption is that services can be used repeatedly. A smartphone may last for three years, but travel can be enjoyed annually, fitness can be practiced weekly, and performances can be watched multiple times—there is no upper limit to the frequency of use. Data supports this trend: the growth rate of service retail sales (5.5%) in 2025 was 1.7 percentage points higher than that of goods, and service consumption accounted for 46% of total consumption. Industries such as tourism and cultural leisure services are experiencing double-digit growth. Service consumption also has high income elasticity—when incomes increase, people are more willing to spend on travel and education rather than buying more clothes. Therefore, it represents the most promising area for future consumption growth.
4. Manufacturing + Services: Overcoming "Price War Frenzy" to Make Goods More Valuable
Many manufacturing companies engage in price wars (comparing the cheapest versions of the same products) due to product homogenization. However, adding services can help break this cycle. For example, Pop Mart sells not just plastic toys but also IP-driven experiences and social interactions, allowing it to charge higher prices and even export its products. Similarly, collectible cards in card games are more than just printed paper; they embody cultural content and a collection system. By integrating services into manufacturing, companies can make their products more valuable, reducing the need for price cuts and increasing profits while attracting customers.
5. Service Consumption Can Also Generate Foreign Revenue; the Domestic Market Is a Training Ground
China has a large trade surplus in goods (8.5 trillion yuan in 2025), but there is a deficit in services (a trade deficit of 828.7 billion yuan). However, the recent success of Chinese short dramas, online literature, and games overseas indicates that our services can also generate foreign currency. Service exports cannot happen overnight; domestic consumers must be willing to spend on cultural, creative, and health services for companies to earn revenue, build talent, and develop brands. For instance, Pop Mart became popular in China before it could export its products, and short dramas gained a domestic market before being translated internationally. Thus, expanding domestic service consumption helps to cultivate the ability to export these services, both stimulating domestic demand and balancing the trade balance.
Conclusion
The key to future consumption growth lies in shifting from selling goods to providing services and experiences. This means supporting low-income groups by increasing their income and offering high-quality services to middle- to high-income groups. By combining manufacturing with the service industry, we can overcome competition and make products more valuable. Additionally, by developing domestic service exports, we can stabilize domestic demand while enhancing long-term competitiveness.