If one were to identify the most frequently cited concerns about China's economy in the foreign media, the imbalance between strong supply and weak demand would top the list.

A more careful reading suggests that what China is experiencing is a transition, as the economy shifts toward consumption-driven growth.

To be clear, the challenge of weaker demand than supply in the economy — acknowledged as an acute imbalance in this year's Government Work Report — is neither unprecedented nor insurmountable.

China's current condition reflects not stagnation, but a developmental transitional stage experienced previously by many industrialized economies.

Demand weakness is often self-reinforcing. When households cut spending amid income uncertainty, businesses see weaker revenues and delay investment or wage increases, further suppressing incomes.

However, from postwar recoveries to responses to global financial crises, governments have managed to restore confidence and revive demand via coordinated fiscal and monetary measures. China will prove no exception to this. The 2026 fiscal deficit-to-GDP ratio is set at around 4 percent, the highest since the record started in 2010 and the same as last year, sending a clear signal of the continuation of a more proactive policy stance.

Continued macroeconomic support has helped stimulate demand. Official data show that China's retail sales, a measurement of consumption, rose 2.8 percent year-on-year over the January-February period, after a 0.9 percent rise in December. During the same period, the consumer price index, a main inflation gauge, rose by 0.8 percent, compared with zero for the whole of 2025 — all pointing to a meaningful recovery in demand.

What should not be overlooked is that the country's insufficient demand also indicates substantial unreleased potential. Household consumption accounts for roughly 40 percent of China's GDP, significantly below the median levels of well above 50 percent in OECD economies, as shown by International Monetary Fund figures, indicating a large reservoir of demand waiting to be tapped.

Further room lies in the distribution of income and the composition of consumption. Data compiled by CSPI Ratings show that China's per capita disposable income accounted for about 43.4 percent of per capita GDP in 2025, compared with around 60 percent in the G7 economies, underscoring the scope to raise household income, the foundation of consumer spending.

Looking ahead, the outline of the 15th Five-Year Plan (2026-30) places great emphasis on strengthening the role of consumption in driving growth and improving income distribution, setting out measures to increase personal income tax deductions, raise rural residents' share of value gains from land, and boost property-based income.

Meanwhile, services account for roughly 46 percent of household consumption in China, compared with nearly 70 percent in the United States. This also highlights substantial potential as the outline of the plan indicates that efforts will be made to expand service consumption by easing market access and foster the integration of business models.

Taken together, what is unfolding in China is not the exhaustion of growth, but a rebalancing of its drivers — from investment and exports toward domestic consumption. The 15th Five-Year Plan is geared to position domestic demand as the most durable engine for the next phase of China's development.

This will not only enhance China's resilience to external shocks and reinforce its stabilizing role in the global economy, but also provide more referential experience and practices for other economies as they seek to tackle similar challenges.