How to boost consumption in 2026? Develop and implement a plan to increase income for urban and rural residents

Source: 21st Century Business Herald Author: Southern Finance and Economics National Two Sessions Reporting Team, Zhang Xu

The 2026 Government Work Report proposes focusing on building a strong domestic market, adhering to domestic demand-driven growth, coordinating efforts to promote consumption and expand investment, and exploring new space for domestic demand growth. This marks the second consecutive year that expanding domestic demand and boosting consumption remain the primary tasks of government work.

In terms of promoting consumption, 250 billion yuan of ultra-long-term special national bonds will be allocated for old-for-new exchanges. This year, a 100 billion yuan fiscal and financial coordination fund will be established to support domestic demand, utilizing methods such as loan interest subsidies, financing guarantees, and risk compensation to support expanding domestic demand.

Notably, for the first time, the government work report this year proposes implementing a plan to increase income for urban and rural residents, introducing pragmatic measures to promote income growth for low-income groups, increase residents’ property income, and improve salary and social security systems. Additionally, in healthcare and social security, the per capita fiscal subsidy standard for residents’ medical insurance will increase by 24 yuan, and the minimum monthly standard for basic pensions for urban and rural residents will rise by another 20 yuan.

Experts believe that increasing residents’ income and improving social security will effectively expand domestic demand.

Peng Bo, researcher at the Ministry of Commerce Research Institute, told 21st Century Business Herald: “Income growth fundamentally enhances consumption capacity. Marginal consumption propensity is higher among low- and middle-income groups, so income increases can quickly translate into consumption. Improving social security alleviates worries, promotes savings to convert into consumption, forming a virtuous cycle of ‘income increase—consumption—growth—further income increase,’ providing lasting momentum for expanding domestic demand.”

“Addition, subtraction, multiplication, and division” to boost consumption

The 2026 Government Work Report ranks “focusing on building a strong domestic market” as the top of the ten key tasks for 2026.

Wang Qing, Chief Macro Analyst at Orient Securities, told 21st Century Business Herald: “This indicates that, amid high external uncertainties, the urgency to expand domestic demand remains strong this year, mainly through promoting consumption and expanding investment.”

On March 5, at a briefing by the State Council Information Office, Shen Danyang, head of the drafting team of the government work report and director of the Research Office of the State Council, explained the measures to expand domestic demand and promote consumption using the concepts of “add, subtract, multiply, and divide.”

On the “addition” side, demand will be expanded by increasing income on the demand side and providing more quality products and services on the supply side. This year, for the first time, a plan to increase income for urban and rural residents will be implemented, with policies to promote income growth for low-income groups, increase property income, and improve salary and social security systems, fundamentally enhancing consumption capacity.

On the supply side, efforts will focus on cultivating new growth points for consumption, implementing quality improvement initiatives for service consumption, and piloting new business models and scenarios to meet demand better. This includes developing cultural tourism, automotive aftermarket, sports events, performing arts economy, and emotional experiential services. Support will also be given to upgrading consumption channels and scene innovation in sinking markets, accelerating the layout of brand chains, and further activating consumption potential in lower-tier markets.

For “subtraction,” the focus is on easing residents’ worries, further releasing consumption potential. This year, efforts will be increased in healthcare, elderly care, childbirth, and nurturing, including raising the standard for medical insurance subsidies and developing inclusive childcare services.

The “multiplication” involves leveraging fiscal and financial coordination to create a multiplier effect, better driving residents’ consumption. In 2025, old-for-new exchanges of consumer goods drove related sales of 2.61 trillion yuan, benefiting 366 million people. This year, support for offline retail will be further increased, focusing on subsidies for key consumer goods such as cars, refrigerators, washing machines, and TVs, which have broad coverage and strong driving effects, including new products like smart glasses to increase subsidy reach and consumer benefits.

Additionally, a new 100 billion yuan fiscal and financial coordination fund for domestic demand has been established. Policies supporting loans for service industry operators and personal consumer loans have been optimized, expanding support areas and increasing subsidy limits to give consumers a stronger sense of gain.

For “division,” efforts will be made to break down barriers and eliminate obstacles, further clearing consumption restrictions and smoothing the consumption cycle. For example, addressing hidden barriers in the market by simplifying approval processes for promotional activities; relaxing vehicle purchase restrictions and increasing car purchase quotas in some cities; supporting street-facing shops to operate outdoor displays, etc.

The service industry remains a focus. The government work report proposes implementing quality improvement initiatives for service consumption, creating broad and high-visibility new consumption scenarios, and accelerating the cultivation of new growth points. It emphasizes activating offline consumption, stimulating sinking market vitality, and removing unreasonable restrictions in the consumption sector to unlock potential in cultural tourism, events, health and wellness, and other fields. Support will be given to regions with conditions to promote primary and secondary school spring and autumn holidays, and to implement paid staggered leave systems for workers. Strengthening consumer rights protection, optimizing the inbound consumption environment, and building a “Shop in China” brand are also priorities.

Wang Qing pointed out that this shift indicates that the focus of promoting consumption is moving from durable goods like automobiles and home appliances to services such as travel, culture, and entertainment. This reflects strong current demand for service consumption among residents, which can enhance the leverage effect of fiscal policies and improve the efficiency of fiscal spending.

Furthermore, Shen Danyang stated at the briefing that this year’s government work report explicitly aims to “expand capacity and improve quality” in the service sector, with the goal of matching high-quality supply to the continuously upgrading demand, making the service industry a new growth point and employment “reservoir” for the economy.

Increasing income and strengthening social security

The 2026 Government Work Report proposes implementing a plan to increase income for urban and rural residents, with pragmatic measures to promote income growth for low-income groups, increase property income, and improve salary and social security systems. In healthcare and social security, the per capita fiscal subsidy standard for residents’ medical insurance will increase by 24 yuan, and the minimum monthly standard for basic pensions for urban and rural residents will rise by another 20 yuan.

At the briefing, Shen Danyang pointed out that the government work report continues to raise the minimum standard for basic pensions for urban and rural residents, benefiting over 180 million elderly people. The central government will allocate 1.25 trillion yuan in subsidies to ensure timely and full pension payments.

To address the insufficient protection of rights for new employment forms, the report proposes advancing pilot programs for occupational injury insurance in an orderly manner, aiming for full coverage across all 31 provinces and Xinjiang Production and Construction Corps this year. It also includes platform companies in travel, instant delivery, and local freight sectors into the pilot scope, ensuring the safety of workers such as delivery riders and ride-hailing drivers.

Experts believe that increasing income while strengthening the social security safety net reflects the country’s people-centered development philosophy.

Peng Bo said that formulating income-increasing plans and improving salary and social security aims to systematically raise living standards and better meet people’s aspirations for a better life. Promoting income growth for low-income groups helps narrow income gaps and promotes social fairness. Raising medical and pension subsidies alleviates residents’ healthcare burdens and further secures the livelihood of the elderly, especially benefiting rural seniors.

“These pragmatic measures not only enhance people’s sense of gain and security but also lay a solid foundation for stable economic and social development,” Peng Bo stated.

Regarding the income-increase plan for urban and rural residents, Peng Bo suggested four focus areas: first, stabilizing employment and improving wages, establishing mechanisms for wage growth and payment guarantees, and increasing the share of labor remuneration; second, broadening channels for property income by activating capital and land factors and enriching residents’ investment options; third, providing targeted assistance to low-income groups through improved social security and transfer payments to narrow income disparities; and fourth, deepening distribution reforms to balance initial distribution efficiency and redistribution fairness.

Since 2025, regions such as Beijing, Hunan, Shanghai, and Guangxi have raised minimum wages. All 31 provinces have minimum wages exceeding 2,000 yuan per month, with Beijing, Shanghai, and Guangdong surpassing 2,500 yuan.

Recently, the National Development and Reform Commission published an article titled “坚定实施扩大内需战略” (“Resolutely Implement the Strategy to Expand Domestic Demand”), emphasizing the implementation of income-increasing plans for urban and rural residents, increasing their share in national income distribution, and raising labor remuneration in initial distribution to achieve synchronized growth of residents’ income and the economy, as well as simultaneous increases in labor pay and productivity. It also advocates increasing government support for inclusive policies benefiting consumers.

Yin Yanlin, a member of the 14th National Committee of the Chinese People’s Political Consultative Conference, previously stated that the formulation and implementation of the “urban and rural residents’ income-increasing plan” is a focus of broad societal concern in expanding domestic demand and building a strong domestic market.

This requires supporting reforms in income distribution, such as increasing fiscal transfer payments to assist vulnerable groups, raising basic pensions for urban and rural residents, optimizing individual income tax policies, lowering the top marginal tax rate, and improving taxation for individual businesses, to effectively increase residents’ income. Deepening reforms in income distribution for research institutes, universities, and state-owned enterprises—such as reasonably increasing remuneration for researchers and appropriately raising wages for teachers and medical staff—will also promote enterprise wage growth.

As the income-increasing plan advances, residents’ incomes are expected to further grow. Experts believe that increasing residents’ income and improving social security will effectively expand domestic demand.