China’s strategic shift toward domestic consumption growth

A consumer walks past an advertisement of e-commerce platform Pinduoduo at a shopping mall in Shanghai. [Photo provided to China Daily]

China is no longer treating consumption as merely an economic outcome. It is increasingly treating consumer spending as a strategic tool.

China's 15th Five-Year Plan (2026-30) marks a critical milestone in the country's development. While earlier phases of reform prioritized investment, exports and infrastructure, the new plan formalizes a structural pivot toward domestic consumption, technological upgrading and systemic resilience.

The new five-year plan makes one thing unmistakably clear: China's next growth engine is not exports. It is consumption. The question is not what, but who will deliver it.

The answer lies in the rapid growth of businesses such as PDD Holdings and its subsidiaries, Pinduoduo and Temu. This is not retail; this is policy execution at scale.

At the center of this transition lies the strategic framework of the "dual circulation" model. This approach prioritizes domestic demand, or "internal circulation", while maintaining openness to global trade and investment, or "external circulation". The objective is not decoupling, but rebalancing — building an economy in which domestic consumption and production reinforce each other in a dynamic cycle.

Within this framework, digital platforms have emerged as critical institutional actors. These companies are not merely commercial enterprises. They function as market infrastructure aligned with national development priorities.

The central challenge for China is the relatively low share of household consumption in GDP compared to advanced economies. Although consumption has risen steadily — from around 35 percent of GDP in 2010 to approximately 40 percent in recent years — it remains the focus of policy intervention.

Platforms like Pinduoduo address this structural issue by targeting previously underpenetrated segments of the market. Its user base is heavily concentrated in lower-tier cities and rural areas, where income levels are low but consumption potential is substantial. By leveraging group-buying mechanisms and direct sourcing, the platform significantly reduces prices, enabling broader participation in consumer markets.

This model aligns with the new plan's emphasis on "common prosperity" and demand-side expansion. By lowering transaction costs and improving accessibility, such platforms effectively activate latent demand among millions of consumers. In doing so, they contribute to social stability while supporting macroeconomic rebalancing.

The dual circulation strategy is not limited to demand expansion; it also involves restructuring the supply. The 15th Five-Year Plan emphasizes industrial upgrading, technological self-sufficiency, and the development of new quality productive forces.

Here, the consumer-to-manufacturer (C2M) model plays a decisive role. By transmitting real-time demand data directly to producers, platforms such as PDD Holdings reduce inefficiencies in production and distribution. This leads to lower inventory levels, faster production cycles, and improved responsiveness to market trends.

For small and medium-sized enterprises, this digital integration ensures stable demand without the need for extensive marketing or distribution networks. In effect, platform-based ecosystems serve as decentralized coordination mechanisms, aligning millions of producers with evolving consumer preferences. This reflects the broader logic of China's planning system, where strategic objectives are implemented through market-oriented instruments.

While domestic circulation is the priority, external circulation remains essential. China continues to rely on global markets both as a source of demand and as a channel for industrial upgrading.

In this context, Temu represents a new model of export integration. Launched in 2022, the platform has rapidly expanded to more than 90 markets worldwide, connecting Chinese manufacturers directly with international consumers. This model bypasses traditional intermediaries and reduces the cost structure of cross-border trade.

The implications are significant. It allows Chinese manufacturers to connect directly with international consumers, improving efficiency and enhancing global competitiveness. And it also contributes to the internationalization of Chinese digital ecosystems, extending their influence beyond national borders.

From a policy perspective, such platforms complement the objectives of the 15th Five-Year Plan, which seeks to strengthen supply chains, expand market access and navigate an increasingly complex global environment.

The growth of platform-based models highlights an important feature of China's economic governance: the integration of State objectives with market mechanisms. Five-year plans no longer prescribe detailed output targets; instead, they provide strategic direction, guiding the allocation of resources across sectors and entities.

In this system, leading technology companies act as intermediaries between policy and market outcomes. Their scale, data capabilities and logistical infrastructure enable them to implement national priorities with a level of efficiency that traditional administrative tools cannot achieve.

PDD Holdings exemplifies this dynamic. Its operations simultaneously address multiple policy goals: expanding domestic consumption, modernizing supply chains, supporting SMEs, and facilitating global trade. This multifunctional role underscores the increasing convergence between digital platforms and economic governance.

China's 15th Five-Year Plan reflects a maturing economic strategy, one that seeks to balance growth with resilience, innovation with inclusion, and domestic strength with global engagement.

The emphasis on consumption is not a short-term stimulus measure, but a long-term structural shift.

In this transformation, digital platforms occupy a central position. They are not simply participants in the market — they are instruments through which the market itself is being reshaped. By integrating demand activation, supply optimization, and global distribution, they embody the operational logic of dual circulation.

As China moves toward 2030, the success of this model will depend not only on policy design but on the continued evolution of such platforms. Their ability to align commercial incentives with national objectives will remain a defining feature of China's economic trajectory.

The author is a former prime minister of the Kyrgyz Republic.

The views don't necessarily reflect those of China Daily.

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