Beijing is expected to strengthen investment in welfare, pensions, education and other public services to unleash domestic demand, analysts say
Beijing’s fresh imperative to “invest in people” – first raised in a proposal for the 15th five-year plan and reaffirmed at an agenda-setting policy meeting last week – reflects a rethink in economic strategy designed to stimulate domestic demand and improve social welfare, analysts said.
China’s leaders vowed to “fully tap” the domestic economy’s potential at the annual central economic work conference held last week, which laid out their economic policy priorities for 2026.
A readout from the meeting said the country must “combine investment in physical assets with investment in people”, while acknowledging the economy faced a catalogue of structural challenges, including weak domestic demand and persistent deflationary pressure.
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Tang Dajie, a senior researcher at the China Enterprise Institute think tank in Beijing, said the “invest in people” slogan reflected Beijing’s focus on boosting consumption, as well as more holistic efforts to improve people’s livelihoods.
“It started with addressing weak consumption but has evolved into full development for all people,” Tang said. “If people are well taken care of, there will be no weak consumption. The only question is how to realise that.”
The concept was first mentioned in the Communist Party’s October recommendations for the next five-year plan, which set an overarching goal of “fostering the comprehensive development of the people”.
In a book introducing the five-year plan proposals published by the party-run Xuexi Publishing House, “investing in people” is defined as empowering people by upping public investment in areas like childcare, elderly care, health, education and human capital development.
“The return from investing in physical assets is declining while we have long underinvested in livelihoods and comprehensive human development,” the book states. “In the transformation of growth towards a demand- and innovation-driven pattern, it is imperative to increase investment in people.”
Tang said this represented a rethink in strategy. “The top leadership has realised that to meaningfully encourage timid consumers to open their wallets, it needs a rethink, a systemic approach,” he said. “Past pro-consumption efforts were piecemeal solutions that did not get to the heart of the matter.”
“With the new focus on people, the hope is that policymakers can respond to some long-held aspirations from the people – from improving patchy social security coverage to caring for underprivileged groups like migrant workers – and come up with systemic, implementable measures,” Tang added.
China’s domestic consumption has remained stubbornly weak in recent months even as Beijing has ramped up efforts to boost spending.
Retail sales slowed for the sixth consecutive month in November, rising just 1.3 per cent year on year after growing 2.9 per cent in October, data from the National Bureau of Statistics showed.
China’s leaders opened the door for more government expenditure in 2026 at the central economic work conference, as they stressed the need to invest in people while assigning a leading role for fiscal policy.
Analysts said the government should prioritise spending on public services and social security.
Robin Xing, chief China economist at Morgan Stanley, urged Beijing to vigorously reform the social security system and expand its funding pool, such as by tapping revenues from state-owned enterprises and assets.
“Inadequate social security protection is a main reason behind weak consumption,” Xing told a forum earlier this month. “The share of social security in government’s overall expenditures should be raised.”
“Once a better social security net is in place, people will spend and the benefits can be manifold: businesses will have less involution-like competition and more profitability,” he added.
Tang also expects the authorities to roll out better social security coverage in 2026, including a substantial rise in basic retirement payments for rural residents.
Meanwhile, policy advisers have underlined the critical importance of education as China looks to boost investment in people.
“Investing in people means more government investment and resources. In the education sector, investment shall be boosted for all types and levels of education. The goal is for the ratio of national education expenditure to gross domestic product to reach 4 per cent or higher so that all children can receive higher-quality education,” said Qian Cheng, a human resources researcher with the Development Research Centre of the State Council, at a seminar last week.
Yu Chunhai, an economics professor at Beijing’s Renmin University of China, told state media that all types of education should receive support. “When education is elevated to a top priority, it should mean all types – from basic education to vocational education and higher education – are important,” he said.
China should also invest in large-scale vocational training to foster a lifelong learning mechanism and help upskill the workforce, Yu added.
There have also been calls for China to establish a long-term mechanism to ensure resource allocations by central and local authorities benefit the people.
Last week, the National Health Commission announced it would expand the national health insurance programme to fully cover all out-of-pocket expenses related to childbirth.
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