China Unveils Comprehensive Plan to Boost Domestic Consumption

Infrastructure, Housing , and Manufacturing Stimulus Look to Support Steel Demand

China’s central government has released a new plan aimed at boosting domestic consumption, with measures designed to increase household income, expand access to essential services, and enhance consumer confidence. The Special Action Plan for Stimulating Consumption, jointly issued by the General Offices of the Communist Party of China Central Committee and the State Council, outlines a broad strategy to support economic growth through stronger consumer demand.

The plan comes at a time when China faces economic headwinds, including weak consumer confidence and sluggish domestic demand. By addressing structural issues that limit spending, policymakers hope to create a more robust and sustainable growth model.

Income Growth is a Key Driver

A central pillar of the plan focuses on increasing incomes to improve purchasing power. The government intends to promote reasonable wage growth in key sectors, expand employment opportunities in small and medium-sized enterprises, and support vocational training programs. It also aims to strengthen mechanisms for adjusting the minimum wage and expand cash-based employment support programs in rural areas.

Additionally, authorities will work to diversify income sources by deepening financial market reforms. The plan calls for stronger stock market stability measures, expanding access for long-term institutional investors, and cracking down on financial misconduct such as fraudulent reporting and illegal share sales by major shareholders.

Expanding Consumer Protection and Essential Services

Another key focus is ensuring affordable access to essential services, including childcare, education, healthcare, and elderly care. The government will explore the introduction of childcare subsidies, expand insurance coverage for workers in flexible employment, and improve pediatric healthcare services. In education, authorities plan to increase financial aid for students in need and align university curricula with industry demand.

Healthcare and pension benefits will also see improvements. The government plans to increase financial subsidies for rural healthcare and basic pensions while expanding coverage for personal retirement accounts. Efforts to remove residency-based restrictions on social insurance enrollment will allow migrant workers and flexible workers to participate more easily.

Strengthening the Service and Tourism Sectors

The plan also emphasizes upgrading the quality of services in key sectors such as dining, tourism, entertainment, and home care. Authorities will support investments in community-based elder care and childcare services, encourage businesses to offer more senior-friendly tourism and wellness products, and promote better regulation of home services and maintenance sectors.

To boost tourism and cultural consumption, the government aims to simplify the approval process for public performances and sports events while allowing for more flexible ticketing. It will also expand visa-free entry policies for foreign visitors, introduce more high-quality inbound tourism packages, and improve international shopping experiences, including tax refund policies for overseas shoppers.

Big-Ticket Consumption and Green Upgrades

China also wants to stimulate spending on major purchases, such as cars, home appliances, and real estate. Authorities will subsidize trade-ins for older appliances and vehicles while promoting greener and smarter consumer goods. Additionally, new housing policies will allow local governments to buy unsold homes for conversion into affordable housing. The plan also calls for easier access to housing loans and expanded rental support for younger buyers and migrant workers.

For the auto sector, China plans to extend its secondhand vehicle market, streamline registration processes, and support new business models such as car rentals and RV tourism.

Improving Consumer Confidence and Market Conditions

The government is also addressing consumer rights and regulatory concerns to improve the spending environment. Authorities plan to enforce fair pricing standards, crack down on misleading online sales tactics, and strengthen consumer protection laws. Additionally, efforts will be made to ensure workers’ rights, including enforcing paid leave policies and limiting excessive overtime.

Local governments are expected to remove unnecessary restrictions on consumption, such as rigid vehicle purchase limits, and simplify business regulations for small merchants and street vendors.

Financial and Policy Support for Consumption Growth

To fund these initiatives, China will increase fiscal and financial support for consumer-driven growth. The government plans to expand consumer credit, allow for longer loan repayment periods, and offer financial incentives for targeted sectors. Additional tax benefits, loan interest subsidies, and investment in public infrastructure such as logistics and retail networks will further support domestic consumption.

That’s the basic rundown. There is still no firm amount of money attached to individual policies, so it is difficult to determine how robust any effect might be. But when it comes to China’s steel industry, these are the items that we think will be the most relevant to markets over the coming years.

1. “Big-Ticket Consumption”

This part of the plan includes policies aimed at stabilizing the housing market, such as:

• Allowing local governments to purchase unsold homes and convert them into affordable housing.

• Expanding housing loan access, lowering mortgage rates, and increasing rental support.

• Funding urban renewal projects, including renovating old buildings and adding elevators to existing structures.

If these measures successfully stop the decline in real estate activity, it could help stabilize steel demand in the construction sector, which has been under pressure due to China’s property downturn. However, the impact depends on execution and funding availability, as past efforts to stimulate real estate have had mixed results.

2. Infrastructure Investment

The plan calls for expanded investments in rural and urban infrastructure, particularly in:

• Transportation and logistics hubs (rail, highways, and warehouses).

• Public services like hospitals, schools, and elder care centers.

• Energy and digital infrastructure, including potential expansion of AI-related power grids and data centers.

These projects typically require large amounts of rebar, structural steel, and sheet steel, providing a medium-term demand boost for steelmakers. Again, however, this depends on government financing capacity—China has already heavily invested in infrastructure, so any additional spending will likely be targeted rather than broad-based.

3. Auto and Appliance Sales Stimulus

The government is pushing trade-in subsidies for cars, appliances, and consumer electronics, including:

• Car replacement incentives, boosting auto sales and indirectly supporting demand for automotive steel (cold-rolled steel, galvanized steel).

• Home appliance trade-in programs, which could benefit demand for electrical steel used in refrigerators, washing machines, and air conditioners.

• Digital product subsidies (smartphones, tablets, smartwatches), though the impact on steel demand in this segment would be minimal.

China’s steel-intensive auto sector has faced weak domestic sales and slow exports, so any increase in consumer-driven demand would help offset industrial slowdown pressures.

4. AI Data Centers and Energy Demand

China is promoting energy infrastructure upgrades to accommodate rising industrial electricity consumption, particularly from:

• AI and data center construction (which require steel for buildings, cooling systems, and transmission infrastructure).

• Grid expansion and renewable energy projects, which need steel-heavy transmission towers, wind turbines, and solar panel mounts.

While AI-linked projects may not be steel-demand-heavy in the short term, sustained investment in power grids and industrial infrastructure could support a longer-term demand base for steelmakers.

Key Takeaways: Will This Meaningfully Boost China’s Steel Demand?

In our view, the current plan primarily stabilizes steel demand in the short term (2025) rather than driving a major rebound, so we are skeptical that we will see a significant boost. While real estate and infrastructure support may help prevent further declines, a meaningful recovery requires broader economic confidence.

In the medium term (2026-2027), a modest recovery in construction steel demand is possible if the infrastructure investments materialize and real estate stops contracting. And looking further ahead (2027+), AI-driven industrial demand and grid upgrades could become new sources of steel consumption, though ultimately their impact will somewhat depend on China’s energy policies.

The biggest wildcard remains China’s ability to finance these initiatives without worsening debt risks. If they can’t deliver on the financing – or simply if domestic steel demand doesn’t respond – Chinese steelmakers may continue turning to exports, which would in turn sustain global oversupply longer than our base case assumption of 2027.

Bottom line: while we don’t think this is a game-changer for the current market, something is almost always better than nothing.