How to boost consumption in 2026? Formulate and implement an urban and rural resident income increase plan

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

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

Regarding promoting consumption, 250 billion yuan of ultra-long special national bonds will be allocated for old-for-new exchanges. This year, a 100 billion yuan special fund will be established for fiscal and financial coordination to boost 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 rural and urban residents’ income increase plan, 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 basic pension 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 shift 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 its 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.”

“Addition” involves increasing demand on the demand side through income growth and on the supply side by increasing quality products and services. This year, the report first proposes implementing a rural and urban residents’ income increase plan, with policies to promote income growth for low-income groups, increase property income, and improve salary and social security systems, fundamentally boosting 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 formats, models, and scenarios. Key areas include cultural tourism, automotive aftermarket, sports events, performing arts economy, and emotional experiential services, which better meet demand. Support will also be given to upgrading consumption channels and scene innovation in sinking markets, accelerating brand chain expansion, and further activating consumption potential in lower-tier markets.

“Subtraction” aims to ease residents’ “worries,” further releasing consumption potential. This year, efforts will increase support in healthcare, elderly care, childbirth, and parenting, raising medical insurance subsidies and developing inclusive childcare services.

“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.

A new 100 billion yuan fiscal and financial coordination fund for domestic demand will also be established. Policies supporting loans for service industry operators and personal consumer loans will be optimized, expanding support areas and increasing interest subsidy caps to give consumers a greater sense of gain.

“Division” involves breaking down barriers and clearing obstacles, further removing restrictions on consumption and smoothing the cycle. For example, to address hidden barriers in the market, policies will be tailored, simplifying approval processes for promotional activities; some cities will further relax vehicle purchase restrictions, increase car purchase quotas, and support eligible street shops to operate outdoor displays.

The service industry is a current focus. The government work report proposes implementing initiatives to improve service consumption quality and benefit the people, creating broad and high-visibility new consumption scenarios, and accelerating the cultivation of new growth points. Efforts will be made to activate offline consumption, stimulate sinking market vitality, and remove unreasonable restrictions in the cultural tourism, events, and health sectors. Support will be given to regions with conditions to promote primary and secondary school spring and autumn holidays and implement paid staggered leave policies for workers. Consumer rights protection will be strengthened, and the inbound consumption environment will be optimized to build the “Shop in China” brand.

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 government spending.

Additionally, 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, ensuring high-quality supply meets 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 rural and urban residents’ income increase plan, 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 for residents’ medical insurance will increase by 24 yuan, and the minimum monthly basic pension 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 urban and rural residents’ basic pensions, 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 steadily and orderly expanding pilot programs for occupational injury insurance, aiming for full coverage across 31 provinces and Xinjiang Production and Construction Corps this year. It will also include platform companies in travel, instant delivery, and local freight sectors, ensuring greater safety for delivery workers, ride-hailing drivers, and others.

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

Peng Bo said that formulating income increase 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 among low-income groups helps narrow income gaps and promotes social fairness. Raising medical insurance subsidies and pension standards alleviates 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 rural and urban residents’ income increase plan, Peng Bo suggested focusing on four 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, 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 and re-distribution 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” (“Firmly Implement the Strategy of Expanding Domestic Demand”), emphasizing that implementing the rural and urban residents’ income increase plan, raising residents’ income share in national income distribution, and increasing labor remuneration’s proportion in initial distribution are key. The goal is to synchronize residents’ income growth with economic growth, and to ensure that increases in labor remuneration match productivity improvements. Policies supporting direct benefits to consumers and increased government spending on livelihood security will be intensified.

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 “rural and urban residents’ income increase plan” are widely concerned in expanding domestic demand and building a strong domestic market.

This requires supporting reforms in income distribution, such as increasing fiscal transfer payments to aid 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 income distribution reforms in research institutes, universities, and state-owned enterprises—such as reasonably increasing researcher salaries and raising wages for teachers and medical staff—will also promote enterprise wage growth.

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