A Key Challenge in Overcoming the MiddleIncome Trap Lies in Boosting Consumption

Abstract: China’s economy has now entered a new phase characterized by weak consumption. Against this backdrop, it is essential to move beyond short-term, cyclical macroeconomic perspectives and analyze the issue of insufficient consumption from a long-term, structural standpoint. One major factor suppressing consumption is the phenomenon of growing old before getting rich—a trend that will persist through 2035. As China moves beyond the middle-income stage, raising the consumption rate involves a dual challenge: first, returning to the average level of upper-middle-income countries, and second, converging toward the standards of high-income nations. The key to addressing this challenge lies in expanding the supply of public services and resolving the structural contradiction between low consumption rates and premature aging. Doing so will help unlock China’s economic growth potential.