China’s Services Push Marks a Bigger Shift in the World’s Second-Largest Economy

Xi said China should pursue a demand-driven approach, combine it with reform and technological upgrading, cultivate stronger China service brands, and move production-oriented services toward more specialized and higher-value positions in the global value chain. Premier Li Qiang reinforced the same theme, saying China should expand the supply of upgraded services, adjust consumption structures to match demographic change, and push technology services such as research and design into higher value-added segments.

The timing matters because Beijing has increasingly concluded that the old growth model is delivering weaker returns. Reuters reported that policymakers have been redirecting attention away from what it described as sometimes wasteful investment in transport, housing, and industrial infrastructure toward services, where the payoff could be more productive and consumption-led. That shift also reflects a hard reality: consumer demand remains soft, and while services sales rose 5.5% in 2025, goods retail sales grew just 3.7% for the year, highlighting how much stronger the services side has become relative to traditional consumption categories.

The structural imbalance Beijing is trying to fix is large. Per-capita services consumption accounted for 46.1% of total spending in 2025, still far below the roughly 70% level seen in the United States, while household consumption makes up only around 40% of China’s economy. China’s new five-year plan pledged to raise that household-consumption share significantly, though it did not set a formal numeric target; Reuters has reported that many policy advisers think a move toward roughly 45% of GDP by 2030 would be a realistic benchmark.

What makes this important for global finance is that a successful services pivot would change where capital flows inside China and how the country generates growth. Beijing has already rolled out a work plan aimed at boosting service consumption in areas including cruise and yacht tourism, smart home-based elderly care, sports events, inbound travel, and experience-based business models, while also encouraging banks and bond markets to fund qualified service companies. But analysts cited by Reuters have warned that supply-side promotion alone will not be enough; stronger household incomes, a better social safety net, and wider welfare support are still necessary if China wants consumption to become a true engine of growth rather than a policy slogan.