For years, the default response to slowing growth was familiar: build more, lend more, export more. But across major economies, that playbook is looking less reliable. Trade is more fragile, property is less dependable, and business investment is increasingly uneven. That is why policymakers from Beijing to Brussels are turning back to a much older engine of growth: the household shopper.  

China is one of the clearest examples, but not the only one. The country grew 5% in 2025, according to the IMF, yet the Fund still argues that its model needs to pivot more decisively toward domestic consumption as the property downturn drags on and households remain cautious. The OECD is similarly forecasting slower Chinese growth in 2026, while Beijing itself has lowered its target range to 4.5% to 5%, a tacit acknowledgment that the era of easy expansion is over.  

That is the real story now. When growth slows, consumption stops being a soft cultural topic and becomes a hard business issue. It matters to retailers, restaurants, travel operators, consumer brands, luxury groups, banks, tech platforms, and any government hoping to stabilize employment without reverting entirely to debt-fueled stimulus.

The old growth machine is losing power

China’s problem is often described as a confidence issue, but it is also a balance-sheet issue. The World Bank says the prolonged housing downturn has weakened household balance sheets because housing historically served as a primary store of value for Chinese families. Falling home prices since 2021 have chipped away at that sense of financial security, making consumers more hesitant to spend.  

That matters because consumption in China still plays a smaller role in the economy than in many richer countries. Reuters, citing official messaging around the new five-year plan, reported this week that household consumption accounts for about 40% of China’s economy, and that per-capita services consumption remains well below US levels. In practical terms, that means there is room for China to become a more consumer-led economy, but also proof that it has not fully made that transition yet.  

The near-term numbers tell the same story. China’s retail sales rose 3.7% in 2025 to 50.12 trillion yuan, according to official data, but growth slowed to 2.8% in the first two months of 2026. Service retail sales were somewhat stronger, rising 5.6% year over year in January and February, which helps explain why Chinese leaders are now speaking so aggressively about expanding services, upgrading supply, and trying to match consumption patterns to demographic change.  

Why policymakers care so much about consumer spending

Consumption is politically attractive because it looks cleaner than another round of brute-force investment. It can lift growth without adding as many empty apartments, underused industrial parks, or debt-heavy infrastructure projects. But it is also much harder to engineer.

You can order a bridge. You cannot order confidence.

That is why the current policy conversation is widening beyond simple shopping incentives. The IMF has argued that China should focus more on social spending and support for households, not just cyclical stimulus. Its logic is straightforward: if families feel less exposed to medical bills, pensions risk, unemployment shocks, or housing losses, they are more likely to save less defensively and spend more normally.  

That debate is not unique to China. A Peterson Institute paper published in late 2025 notes that many economists have long linked weak social protection to higher precautionary saving and lower household consumption. In other words, when people do not trust the safety net, they build their own. That may be rational for families, but it is a drag on consumer-led growth.  

This is a business story as much as a policy story

The business implications are wider than headline GDP forecasts suggest. When households feel squeezed, they do not simply stop buying. They reprioritize. McKinsey’s 2025 State of the Consumer report, based on nearly 26,000 consumers across 18 markets, found that people are still spending, but with sharper value scrutiny, more selective brand loyalty, and greater emphasis on what feels worth the money. That tends to reward companies that can offer either clear affordability or a sense of justified indulgence. The mushy middle gets exposed.  

That is one reason service spending keeps attracting so much attention. Experience-led categories often hold up better than expected because consumers will cut some physical purchases before giving up small pleasures, convenience, dining out, or occasional travel. Even in China, where goods spending has been softer, official data show catering and services outperforming the broader retail number.  

For companies, the lesson is not merely “target the consumer.” It is to understand what kind of consumer emerges in a slow-growth environment. This shopper is more price-aware, less euphoric about asset wealth, more interested in utility, and often more willing to trade down in one area in order to preserve comfort in another.

The wider global backdrop makes this harder

This consumer turn is happening at a complicated moment. The OECD now projects global growth of 2.9% in 2026, with uncertainty tied to conflict, energy markets, trade friction, and softer consumer spending in advanced economies. It also notes that real household income growth has lagged real GDP growth in the OECD area, a reminder that macro expansion does not always translate into a stronger everyday spending mood.  

That broader backdrop matters for China too. If export demand becomes less dependable and property no longer delivers the same wealth effect, then domestic demand becomes not just desirable but necessary. Beijing’s recent emphasis on “demand-driven” growth in services is really a recognition that the next stage of expansion cannot rely on the old pillars alone.  

What comes next

The most interesting question is not whether governments want consumers to spend more. Of course they do. The real question is what actually makes households feel secure enough to do it.

Subsidies can help at the margin. Trade-in programs can lift sales for a quarter or two. Promotional events can boost retail numbers. But durable consumption growth usually comes from something less theatrical: rising incomes, stronger household balance sheets, better public services, and a believable sense that tomorrow will not be worse than today.  

That is why this moment feels bigger than one country. As the global economy cools, more governments are discovering the same uncomfortable truth: consumers are not a fallback plan. They are the plan. And getting them to spend is far harder than telling them to.