China Needs a Consumption Stimulus Package Worth Over One Trillion Yuan

Abstract: Current U.S. trade policy lacks consistency, but the trend toward imposing additional tariffs appears unavoidable. Regardless of the motivation—be it increasing fiscal revenue, addressing trade imbalances, or using tariffs as a bargaining chip—such measures are likely to have a substantial impact on China’s economy, which is heavily reliant on manufacturing and maintains a significant trade surplus with the United States.

At the macro level, there are four primary policy options for mitigating external shocks: diversifying export markets (while considering the absorption capacity of trading partners), adjusting the exchange rate (which requires careful analysis of the trade-offs), expanding investment (which faces numerous practical constraints), and boosting domestic consumption. Among these, a process of elimination suggests that expanding consumption is the most feasible and effective option under current conditions.

According to estimates of CF40 Research reports, the impact of U.S. tariffs on China’s economy could reach approximately 2 trillion yuan. To meaningfully offset the drag from weakening external demand, additional consumption-boosting policies should amount to no less than 1 trillion yuan. Strengthening domestic consumption is not only a matter of internal economic management—it also carries diplomatic significance, as it helps prevent a sudden surge of Chinese exports into thirdcountry markets that could trigger secondary trade tensions.