An engineer works on humanoid robots at an Agibot factory in Shanghai, China, March 12. Reuters-Yonhap
An engineer works on humanoid robots at an Agibot factory in Shanghai, China, March 12. Reuters-Yonhap
China published a new action plan last Sunday aimed at boosting consumer spending, and the immediate question for many observers was whether this "spend, spend, spend" initiative will be effective this time around.
Historically, China has pursued strategies to stimulate domestic spending since the late 1990s, when the country began producing more goods than it could consume or export. Two primary schools of thought have emerged on how to encourage increased spending.
The first focuses on the demand side, which asserts that as people's incomes rise, their spending tends to increase accordingly. Proponents of this approach advocate for steady growth in household incomes and national income distribution. During China's annual parliamentary gathering in March, there were plenty of proposals for cutting personal income tax.
The second perspective emphasizes the supply side of consumer spending. This suggests that the average disposable income of Chinese residents has been rising in tandem with economic growth. According to official data, the per capita disposable income in China grew by 5.3 percent in 2024, aligning with a gross-domestic-product growth of 5 percent.
That viewpoint posits that Chinese households have already accumulated sufficient spending power, and the key to boosting consumption lies in providing attractive products and services that would encourage consumers to open their wallets.
People walk past a shopping mall in Beijing, China, March 11. AFP-Yonhap
People walk past a shopping mall in Beijing, China, March 11. AFP-Yonhap
Beijing has attempted to address both perspectives in its consumption strategies. But in practice, it often leans toward supply-side initiatives, which do not involve difficult structural reforms.
The government's latest plan reflects such tendency. Only four out of 30 measures addressed income, conspicuously omitting personal income tax cuts or direct cash handouts. Despite this oversight, the plan introduces several highlights that could stimulate consumer spending in the world's second-largest economy, based on certain trends that Beijing has identified.
Historically, China has been successful in boosting overall consumer spending by focusing on key items. In the 1970s and early 1980s, the "three big items" were sewing machines, bicycles and radio receivers, which met the basic needs of households emerging from absolute poverty.
The focus shifted in the 1990s to color televisions, refrigerators and washing machines. This enhanced the country's manufacturing capabilities and fostered the first generation of national brands, such as Haier and TCL. From the late 1990s until a few years ago, heavy spending on cars and property had driven China's last economic boom.
China is now seeking the next "big items," and the latest plan suggests several potential candidates. A clear choice is to encourage the upgrading of home appliances and vehicles to "smart" and "green" alternatives, a trend that is gaining traction because of the democratization of artificial intelligence (AI) applications and electric vehicles.
For the first time, China has highlighted AI as a key focus in its consumer spending plan, along with autonomous driving, smart wearables, brain-computer interfaces, drones and robotics.
While the markets for these technology-intensive products are currently small or nonexistent, they hold significant growth potential. In the 1980s, color televisions were considered luxuries for many Chinese households. Within a decade, these products became commonplace. Mobile phones, once seen as a status symbol and referred to colloquially by the nickname "Big Brother Big," quickly became essential for nearly every adult within a few years.
Is China on the brink of a new consumer spending era, where humanoid robots become ubiquitous in kitchens and living rooms? The answer remains uncertain. However, technological advances offer hope that Beijing's latest plan to stimulate consumer spending would succeed.
Read the full story at SCMP.