Core Viewpoint - China has accumulated a significant amount of social net wealth, and low bank savings rates suggest that net wealth can only grow through capital markets, indicating a transformative change in the sources of capital market funding compared to the past [1][10]. Economic Growth and Challenges - China's economic recovery post-COVID-19 has shown a generally positive trend, achieving growth targets of 5.2% and 5% in the past two years, placing it among the leading global economies [3]. - The macroeconomic environment faces increasing pressure from declining demand, with the GDP deflator index experiencing negative growth for nine consecutive quarters [3]. - The primary challenge during the "14th Five-Year Plan" period is not insufficient investment but rather insufficient consumption, which is significantly deviated from both international averages and typical economies at similar development stages [3][4]. Structural Consumption Issues - The structural bias in consumption is largely attributed to insufficient service consumption, particularly in education, healthcare, affordable housing, social security, and elderly care [4]. - The disparity in consumption is exacerbated by various factors, including low levels of public services, urbanization lag, income inequality, and a long-standing policy focus on investment over consumption [4]. Proposed Structural Reforms - To effectively expand consumption, three key areas for structural reform are identified: 1. Addressing housing shortages for new urban residents, particularly migrant workers, through government initiatives to convert unsold housing into affordable options [7]. 2. Reforming the rural pension system to significantly increase pension income for rural residents, thereby unlocking consumption potential for a large segment of the population [7]. 3. Promoting a new wave of urbanization by facilitating the smooth flow of production factors between urban and rural areas, enhancing rural residents' income [7]. Financial Market Development - A strong financial market is essential for supporting both consumption and manufacturing sectors, with a focus on establishing robust monetary and capital markets [9][10]. - The capital market is expected to enter a new development phase, with a shift in funding sources and an emphasis on nurturing globally competitive large tech firms and innovative SMEs [10]. - The strategy includes balancing imports and exports, promoting the use of the RMB in international trade, and enhancing the international status of the RMB as a reserve currency [10].

Core Viewpoint - China has accumulated a significant amount of social net wealth, and with low bank savings rates, the only way for this wealth to grow is through capital markets. This marks a transformative change in the sources of incremental capital market funding compared to the past [1]. Economic Challenges - During the "14th Five-Year Plan" period, China faces urgent challenges of demand constraints and insufficient consumption. Structural reforms in three key areas are recommended to effectively expand consumption [2]. Consumption Structure Issues - The consumption structure in China shows significant deviations when compared to international averages, primarily due to insufficient growth in service consumption. This structural bias is attributed to various factors, including low levels of public services, urbanization challenges, income disparities, and a long-standing policy focus on investment over consumption [4][5]. Structural Reforms for Consumption Expansion - To address consumption inadequacies, it is essential to focus on structural reforms that target the root causes of low consumption levels. This includes addressing the needs of low-income groups and improving access to essential services such as education, healthcare, and housing [7][8]. Specific Areas for Structural Reform - Three key areas for structural reform are identified: 1. Focus on providing housing solutions for migrant workers by converting unsold properties into affordable housing [8]. 2. Reform the rural pension system to increase pension income significantly, thereby unlocking consumption potential for a large segment of the population [9]. 3. Promote the smooth flow of production factors between urban and rural areas to stimulate a new wave of urbanization [9]. Financial Market Development - A strong financial market is essential for supporting a consumption-driven economy. The capital market is expected to enter a new development phase, with a shift in the sources of incremental funding due to declining real estate growth and low bank interest rates [12]. Global Market Integration - Implementing a balanced import-export strategy is crucial for enhancing the international status of the Chinese yuan. This involves increasing imports to boost the yuan's role as a reserve currency, moving away from a reliance on exports for foreign exchange reserves [12].