(March 25): China should raise consumption to a level close to those of developed countries in the next decade, a government adviser said, adding to calls to rebalance the world’s second-largest economy away from investment and export.

Peng Sen, president of the China Society of Economic Reform, said Tuesday authorities should make efforts to boost consumption as a share of gross domestic product to 70% by 2035 from about 55% currently. Peng’s think tank is affiliated with the National Reform and Development Commission, China’s economic planner.

“Our fiscal system used to focus on investing heavily in projects but now we need to shift to investing in people,” Peng, former vice chairman of the NDRC, said at the Boao Forum for Asia. “China needs to narrow that international gap,” he said, citing consumption levels as high as 80% of GDP in wealthier nations.

Peng’s remarks add urgency to calls for China to adjust its growth model as geopolitical tensions threaten to slow exports and returns on investment diminish. The Chinese government has made boosting domestic demand, particularly consumption, as the top economic priority this year, although authorities didn’t put a number to that goal.

China’s economy expanded rapidly over the past four decades by increasing manufacturing and production but that has had the side effect of repressing consumption, Peng said. To continue to grow, he said, consumption should increase by five to eight percentage points as a share of GDP in the next five years, with the first step being boosting income and distributing more wealth to consumers.

Made in China 2025

That investment boom has helped support China’s industrial sector, the target of Beijing’s controversial industrial policy that was unveiled a decade ago to turn the nation into a technological leader.

China has mostly accomplished that blueprint, called Made in China 2025, another former official said at the event known as China’s Davos.

Some 96% of the targets listed in the project have been met as of 2024, former Chongqing mayor Huang Qifan said at the forum. The rest of the goals are roughly achieved, he said.

“If we continue to patch up the missing parts this year, I believe we will fully complete the goal of Made in China by the end of this year,” said Huang, academic adviser at the think tank China Finance 40 Forum.

The plan identified 10 strategic industries in which China aspired to become globally competitive by 2025 and globally dominant during this century, such as new-energy vehicles and robotics.

It drew the ire of Donald Trump during his first term, inflaming tensions that led to the first US-China trade war. Washington has since tried to curb China’s advancement in key technologies like semiconductors with export controls, sanctions and tariffs.

Even though the government has downplayed the programme in recent years to avoid further tensions, China has kept investing in advanced manufacturing as policymakers seek new growth drivers following a property market crash. That led to explosive growth in sectors such as solar panels, batteries and electric vehicles.

Research by Bloomberg Economics and Bloomberg Intelligence last year showed that Made in China 2025 has largely succeeded. Of 13 key technologies tracked, China has achieved a global leadership position in five of them and is catching up fast in seven others, according to the study.

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