China's social security improvements to unleash consumer power: economist

BEIJING, Jan. 27 (Xinhua) -- China's ongoing improvements to its social security system will significantly boost domestic consumption and provide fresh impetus for economic growth, according to an economist.

Lu Ting, chief China economist at Nomura, emphasized that reforms to the social safety net will improve income expectations for vast segments of the population, including the elderly and migrant workers, thereby raising the mid-to-long-term consumption ratio.

"Reforming the social security system represents a more effective and sustained approach to stimulating consumption. I believe the next two to three years present a critical window of opportunity for such measures," Lu told a press briefing.

China has launched a nationwide subsidy program to support elderly people with disabilities in purchasing care services, authorities announced last week.

The program, starting on Jan. 1, was launched by the Ministry of Civil Affairs and the Ministry of Finance. It provides seniors who have difficulty taking care of themselves with monthly electronic vouchers over 12 months, partly offsetting costs for home-based, community-based and institutional elderly care services.

Lu pointed out that increasing pensions and subsidies for China's aging population carries a strong marginal effect in supporting consumption. He also pointed out that expanding insurance coverage to more people in flexible jobs would further help boost consumer spending.

While China's aging population presents demographic challenges, it also creates opportunities. A key Communist Party of China document adopted last October underscored the need to "combine investment in physical assets with investment in human capital" over the next five years, a measure analysts view as vital for integrating social welfare with economic development.

Looking ahead, Lu predicted that fiscal policy will be a central focus for China this year. He suggested that the allocation of fiscal funds is, in some aspects, more crucial than the overall scale, anticipating incremental growth in subsidies directed towards key groups such as the elderly and migrant workers.

Regarding China's 2026 economic outlook, Lu forecast a rebound in the second half of the year, driven by stronger policy support. Growth in the first half, however, may be comparatively lower due to a high base of comparison.

Lu acknowledged that exports, supported by China's massive industrial base, rising productivity, and comprehensive industrial system, have been a vital pillar of the economy. He projected that this manufacturing strength will continue to propel steady export growth in the coming years, but cautioned about potential downside risks from international trade barriers.