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 Report Team, Zhang Xu

The 2026 Government Work Report proposes to focus on building a strong domestic market, adhere to domestic demand-driven growth, coordinate efforts to promote consumption and expand investment, and explore new space for domestic demand growth. This is also the second consecutive year that expanding domestic demand and vigorously boosting consumption have become 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 promote domestic demand, using a combination of loan interest subsidies, financing guarantees, and risk compensation to support expanding domestic demand.

Notably, for the first time in this year’s government work report, a plan to increase income for urban and rural residents has been proposed, with pragmatic measures introduced to promote income growth for low-income groups, increase residents’ property income, and improve salary and social security systems. At the same time, in healthcare and social security, the per capita fiscal subsidy standard for residents’ medical insurance will be increased by 24 yuan, and the minimum monthly standard for basic pensions for urban and rural residents will be raised 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. The marginal propensity to consume is higher among middle- and low-income groups, so income increases can quickly translate into consumption. Improving social security alleviates worries, promotes savings to turn 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 on the demand side by increasing income and on the supply side by increasing the supply of high-quality products and services. This year, the government work report proposed for the first time to implement a plan to increase income for urban and rural residents, 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 and benefit enhancement actions for service consumption, and piloting new formats, models, and scenarios for consumption. Key areas include cultural tourism, automotive aftermarket, sports events, performing arts economy, and emotional experiential services, which can better meet demand. Additionally, targeted policies will support upgrading consumption channels and scene innovation in sinking markets, accelerate the layout of brand chains, and further activate consumption potential in lower-tier markets.

For “subtraction,” efforts will be made to ease residents’ worries, further releasing consumption potential. This year, support in healthcare, elderly care, childbirth, and nurturing will be increased, with higher medical insurance subsidies and the development of inclusive childcare services.

For “multiplication,” coordinated fiscal and financial efforts will leverage multiplier effects to better stimulate 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 allow more people to receive subsidies and exchange products.

A new 100 billion yuan fiscal and financial coordination fund for promoting domestic demand has also been established this year. Policies supporting loans for service industry operators and personal consumer loans have been optimized, expanding support areas and increasing subsidy limits, allowing more consumers to feel the benefits.

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

The service industry is a current focus. The government work report proposes to implement quality improvement and benefit enhancement actions for service consumption, create a batch of broad-reaching and high-visibility new consumption scenarios, and accelerate 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 for places with conditions to promote primary and secondary school spring and autumn holidays, and the implementation of paid staggered leave systems for workers, will be strengthened. Consumer rights protection will be enhanced, and the inbound consumption environment optimized to build the “Shop in China” brand.

Wang Qing pointed out that this means the focus of promoting consumption is shifting from durable goods like automobiles and home appliances to services such as travel, culture, and entertainment. Behind this is the current strong demand for service consumption among residents, which helps improve the leverage effect of fiscal policies to promote consumption and increase the efficiency of fiscal funds.

Additionally, Shen Danyang stated at the briefing that this year’s government work report clearly emphasizes promoting the “expansion and quality improvement” of the service industry, aiming to match high-quality supply with the continuously upgrading demand, making the service sector a new growth point and a “reservoir” for employment.

Increasing income and enhancing social security

The 2026 government work report proposes to develop and implement a plan to increase income for urban and rural residents, with pragmatic measures to promote income growth for low-income groups, increase residents’ 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 be increased by 24 yuan, and the minimum monthly standard for basic pensions for urban and rural residents will be raised by another 20 yuan.

At the briefing, Shen Danyang pointed out that the government work report proposes to continue raising 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 to steadily and orderly expand pilot programs for occupational injury protection. This year, coverage will be extended to all 31 provinces and Xinjiang Production and Construction Corps, including platform companies in the travel, instant delivery, and same-city freight sectors, ensuring the safety of more delivery workers, ride-hailing drivers, and other laborers.

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 and step-by-step raise people’s living standards and better meet their aspirations for a better life. Promoting income growth for low-income groups helps narrow income gaps and promotes social fairness. Raising medical insurance subsidies and pension standards reduces residents’ medical 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 efforts in four areas: first, stabilizing employment, improving wages, and establishing mechanisms for wage growth and payment guarantees; second, broadening channels for property income by activating capital, land, and other factors, 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 with redistribution fairness.

Since 2025, regions such as Beijing, Hunan, Shanghai, and Guangxi have successively raised minimum wages. All 31 provinces’ first-tier minimum wages exceed 2,000 yuan per month, with places like Beijing, Shanghai, and Guangdong reaching over 2,500 yuan.

Recently, the National Development and Reform Commission published an article titled “Firmly Implementing the Strategy of Expanding Domestic Demand,” emphasizing the implementation of income-increasing plans for urban and rural residents, increasing the proportion of residents’ income in national income distribution, and raising the share of labor remuneration in primary distribution, striving for synchronized growth of residents’ income and the economy, and simultaneous increases in labor remuneration and labor productivity. It also advocates increasing government support for inclusive policies directly 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 “Income-increasing Plan for Urban and Rural Residents” is a focus of broad social 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 treatment for researchers and appropriately raising wages for teachers, doctors, and other public servants—will also drive corporate salary growth.

With the advancement of the income-increasing plan, residents’ income is expected to further grow. Experts believe that increasing residents’ income and improving social security will effectively expand domestic demand.

(Edited by: Wen Jing)