Beijing Is Betting On Its Domestic Market To Revive Its Economy

In the face of the economic slowdown and international trade tensions, the Chinese government is deploying an ambitious strategy to boost its domestic demand. The State Council has just launched a “special action plan” aimed at revitalizing national consumption, considered the new growth engine to achieve the 5% target by 2025.

To boost its growth, Beijing stimulates domestic demand

The State Council of China presented a large-scale plan at the end of February to revitalize its domestic consumption. This program, much more ambitious than previous measures, aims to “support consumption vigorously and expand domestic demand in all directions,” according to the official statement.

Beijing intends to substantially increase the incomes of urban and rural populations while reforming the housing sector to improve the financial resources of farmers.

Unlike previous temporary measures, such as the 20 billion euros in coupons distributed last summer for the automotive and home appliance markets, this plan addresses economic fundamentals.

What changes compared to previous plans is the structural aspect of the stimulus measures. We are no longer talking about simple temporary subsidies but about sustainable wage increases.

Ariel Ying Wang, equity manager at Gemway AM.

The plan also includes a significant social component, with an increase in retirement pensions, the potential creation of a subsidized childcare system, and a strengthening of the legal protection of workers’ rights to rest and vacations. Financial institutions will also be encouraged to ease conditions for consumer loan approvals.

A strategic response to American and European pressures

This strategic reorientation occurs in a context of strong trade tensions with the West, following the implementation of Trump’s new tariffs, which prompted Canada and China to launch a retaliation. Since his return to the White House in January, Donald Trump has imposed an additional 20% tariff on all Chinese products, as well as an additional 25% tariff on steel and aluminum imports. These measures have already affected Chinese exports, which grew only 2.3% in January-February 2025, well below the 4.5% anticipated by analysts.

The European Union is not to be outdone, having imposed significant tariffs on electric vehicles imported from China, directly impacting manufacturers such as Cupra, a subsidiary of Volkswagen. Wayne Griffiths, CEO of Seat and Cupra, has denounced these taxes which, according to him, ” penalize the automotive industry instead of protecting it “.

Faced with these threats to its traditionally export-driven economic model (which reached a record 3.4 trillion euros in 2024), Beijing has no choice but to turn to its domestic market.

Meanwhile, the People’s Bank of China has launched a medium-term lending operation of 300 billion yuan (approximately $41.83 billion) to support the banking system and maintain favorable liquidity conditions.

“The recovery of domestic consumption could offset a potential drop in exports to achieve the 5% growth target set for 2025”, anticipates Ariel Ying Wang. A bold but necessary bet for the Chinese economy in the face of opposing global geopolitical winds.