For the better part of the last decade, China’s economic narrative has been defined by one central doctrine: “supply-side reform”. Since President Xi Jinping introduced the concept in 2015, Beijing has been laser-focused on boosting productivity, eliminating excess capacity and cultivating new technologies.
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The results have been striking. China now leads the world in the production of electric vehicles and solar energy, and has made significant strides in artificial intelligence, particularly in patents and research publications. Yet as the global and domestic landscape evolves, the time has come for a new pivot – one that prioritises the other half of the equation: demand.
Last month, the Communist Party’s Politburo signalled a potential turning point. In a rare shift in rhetoric, policymakers emphasised the “four stabilities” – stabilising employment, enterprises, markets and expectations – while acknowledging the need to boost household income and consumption. It’s the clearest sign yet that “demand-side reform” is moving from the periphery of China’s policy toolkit to centre stage.
To understand the urgency behind this shift, we must first revisit what supply-side reform has accomplished. Over the past 10 years, China has tackled bloated industrial sectors, reined in speculation in the property market and suppressed the most polluting, inefficient industries. Strategic industries – from semiconductors to clean energy – received generous state support. Culturally and politically, China reoriented itself around productivity and self-reliance.
The strategy paid dividends. Despite trade wars, tech bans and a once-in-a-century pandemic, China is now a powerhouse in emerging sectors. Companies like BYD, DJI and TikTok owner ByteDance have become household names across continents. The economy has transformed not just in scale but in sophistication.
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But supply-side success does not automatically translate into strength in demand. And this is precisely the predicament China faces.