Guo Liyan: A Strong Domestic Market is the Strategic Support for Chinese Modernization
Looking Ahead
During the "Fifteenth Five-Year Plan" period [1], the environment for China’s development faces profound changes. Against a backdrop of increasing uncertain and unpredictable factors, the scarcity of the market as a strategic resource has become more prominent. The Proposals of the CPC Central Committee on Formulating the Fifteenth Five-Year Plan for National Economic and Social Development (hereafter referred to as the Proposals) posit that "a strong domestic market is the strategic mainstay for Chinese-path modernization" and deploy a series of measures to build such a market. Over the next five years, the key is to persist in taking the expansion of domestic demand as a strategic base point, promoting a virtuous cycle between consumption and investment, and between supply and demand. This will enhance the endogenous momentum and reliability of the domestic macro-circulation [2], thereby accelerating the transition of the domestic market from large to strong, and providing a more robust and surging endogenous engine for the solid promotion of high-quality development.
I. Basic Essentials and Characteristics of a Strong Domestic Market
The important thesis that "a strong domestic market is the strategic mainstay for Chinese-path modernization" is rooted in the basic tenets of Marxism. It represents an innovative development of Marxist political economy by Xi Jinping Thought on Economy, containing rich connotations. This thesis reveals the foundational and supportive role of domestic demand in the process of advancing Chinese-path modernization. Building a strong domestic market and promoting a virtuous interaction between supply and demand to achieve a high-level dynamic equilibrium will provide a solid foundation for accelerating the construction of the New Development Paradigm [3].
The domestic market encompasses all fields, platform media, and rule systems for the exchange of goods and services within a country's borders. To understand the basic essentials of a strong domestic market, the key lies in understanding the dialectical relationship between "strong" and "large." "Large" refers to the massive scale of the economic aggregate, the vast market capacity, and the rapid relevant growth rate. It is estimated that by the end of the "Fourteenth Five-Year Plan," China's economic aggregate will reach 140 trillion yuan. Calculated by the Purchasing Power Parity (PPP) method published by the World Bank, China has already become the world's largest consumer market, with a growth rate leading other major economies. Building on this, "strong" refers to the quality, efficiency, structural level, and competitive advantages of economic and market development—namely, the importance and influence of the Chinese economy and market on a global scale.
Building a strong domestic market is a systemic undertaking. It must be guided by goals and oriented toward solving problems, focusing on the simultaneous dynamic leap of the supply, distribution, circulation, and demand systems corresponding to the four major links of production, distribution, circulation, and consumption in the national economic cycle. This aims to accelerate the formation of a strong market with larger scale, optimized structure, better quality and efficiency, and more complete rules, providing more surging momentum for promoting high-quality development and realizing Chinese-path modernization.
First, we must promote the upgrade of the supply system from low to high levels. We should lead industrial upgrades through consumption upgrades, vigorously promoting the development of the real economy—especially manufacturing—toward intelligence, greening, and integration. This ensures that all types of enterprises operate independently and compete fairly, continuously enhancing their status in the international division of labor and their ability to participate in value distribution.
Second, we must improve the income distribution system. We will increase the share of resident income in the distribution of national income and the share of labor remuneration in primary distribution. We will strengthen redistributive adjustments such as taxation and social security, implement plans to increase the income of urban and rural residents, and promote the formation of an olive-shaped distribution pattern [4].
Third, we must improve the overall efficiency of the modern circulation system. We will soundly integrate circulation rules and standards, accelerate efforts to "bridge the weak links" [5] in market facilities and achieve high-standard connectivity, and improve the logistics network's ability to support the efficient flow of economic factors, developing new forms such as hub-based and corridor-based economies.
Fourth, we must drive effective investment through consumption upgrades, promoting the upgrade of the demand system from low to high levels. During the "Fifteenth Five-Year Plan" period, the demand levels and purchasing power of Chinese residents will continue to rise, accelerating the shift from subsistence-based consumption to development-based consumption. The proportion of service consumption expenditures will continue to expand, and new "AI+" products and services will constantly emerge, driving investment growth in emerging fields and expected to release trillion-level potential in domestic demand.
II. The Necessity and Urgency of Building a Strong Domestic Market during the "Fifteenth Five-Year Plan" Period
During the "Fifteenth Five-Year Plan" period, China's development remains in a period of important strategic opportunity where much can be achieved. The distinct characteristics of the era require that we utilize the strategic resource of the domestic market fully and effectively. By activating and releasing the potential of domestic demand and relying on an ultra-large-scale market to strongly support technological innovation and industrial upgrading, we will promote virtuous interactions between supply and demand. This will enhance the economy's resilience and risk-resistance, continuously improve people's well-being, better meet their aspirations for a better life, and contribute Chinese strength to the stable development of the global economy.
Building a strong domestic market can better meet the people's ever-growing needs for a better life. The internal stability of the domestic macro-circulation is primarily reflected in the support domestic demand provides for economic development. During the "Fifteenth Five-Year Plan" period, the scale of China's middle-income group will further expand, and the urbanization level of the registered population will continue to rise. The key is to grasp from a global perspective the income distribution, consumption expectations, and consumption capacity that support the accelerated release of effective demand potential. We must focus on the people's needs for a better life, strive to optimize the income distribution structure, expand the supply of high-quality consumer goods and services, and satisfy existing needs while opening up new ones.
Building a strong domestic market can guarantee high-level science and technology self-reliance and the security of industrial and supply chains. During the "Fifteenth Five-Year Plan" period, a new round of technological revolution and industrial transformation is developing in depth. International competition surrounds fields such as artificial intelligence, and new technologies and formats are driving the formation of more new markets. For the commercial application of disruptive technologies, the market will become an even scarcer resource, and the advantages of China's ultra-large-scale market will become more prominent. We must concentrate efforts on lead-standard setting, brand building, and quality improvement, striving to "supplement, strengthen, and extend" chains [6]. We must intensify effective investment in new digital and intelligent infrastructure, promoting the Internet of Things (IoT) and Industrial Internet to generate greater radiation and driving power.
Building a strong domestic market can clear the sticking points and bottlenecks that restrict the supply-demand cycle. Larger market and industrial scales are the foundation of being "strong." On this basis, constructing a high-standard market system that is unified, open, competitive, orderly, and characterized by complete institutions and refined governance will help smooth the economic cycle between production, distribution, circulation, and consumption. This will continuously improve the quality and level of the economic cycle, promoting the realization of a dynamic equilibrium between supply and demand at a higher level. Building a strong domestic market is not about pursuing a closed internal cycle, but rather about continuously expanding domestic and international openness. It involves both "breaking down walls to build the new" to base development on our own strength, and coordinating the effective use of global factors and market resources.
Building a strong domestic market can actively respond to the adverse effects of anti-globalization. During the "Fifteenth Five-Year Plan" period, although the world has entered a new period of turbulence and change, and trade protectionism and unilateralism have disrupted the international economic and trade environment, economic globalization remains the great historical trend. China's construction of a strong domestic market is conducive to enhancing its global competitiveness, contribution, and driving effect, effectively responding to the new situation of changes unseen in a century. At the same time, the collective rise of the "Global South" is a prominent sign of the great changes in the world. By opening up emerging industrial ecosystems and promoting mechanisms for linking domestic and external markets, China will join hands with Global South countries to move toward modernization, providing stronger support for building a community with a shared future for humanity.
III. Internal and External Conditions for Building a Strong Domestic Market during the "Fifteenth Five-Year Plan" Period
The "Fifteenth Five-Year Plan" period is a critical stage for consolidating the foundation and exerting full force. An in-depth analysis of the internal and external conditions facing China's market development currently and in the coming period is conducive to accurately grasping the general trend of future development. It allows us to seize the period of strategic opportunity, consolidate and expand our advantages, and accelerate the construction of a strong domestic market with larger scale, stronger resilience, better efficiency, and more complete rules.
The "Fifteenth Five-Year Plan" period is a strategic opportunity for promoting the dynamic equilibrium of supply and demand at a higher level. By comprehensively optimizing and upgrading the structures of both supply and demand, China's economy will accelerate its shift toward a development model led by domestic demand, driven by consumption, and characterized by endogenous growth. On the New Journey, leveraging the institutional advantages of socialism with Chinese characteristics and using the new-type whole-of-nation system [7] to drive breakthroughs in core technologies in key fields across the entire chain will promote the deep integration of scientific and industrial innovation, causing a new leap in social productive forces.
From the demand side, China possesses an ultra-large-scale domestic market of over 1.4 billion people; it is expected that the middle-income group will exceed 800 million in the next decade, providing a broader testing ground and application scenarios for new technologies and products. From the supply side, China possesses the world's most complete industrial system, with strong industrial chain synergy and supporting capabilities. We have achieved a series of breakthroughs in developing new quality productive forces, accelerating the cultivation and strengthening of new momentum and growth engines. In recent years, while the traditional population dividend has weakened, the human capital dividend is being released at an accelerated pace, providing a solid talent foundation for scientific and industrial innovation. Furthermore, China's infrastructure, especially new infrastructure, enjoys significant global advantages, laying a good foundation for the deep integration of the digital and physical economies.
Overall, opportunities outweigh challenges, but we must also objectively analyze and actively respond to those challenges. The massive demand potential of the domestic market has yet to be fully converted into actual consumption. The proportion of subsistence-based consumption expenditure remains high, while there is significant room for improvement in development- and enjoyment-oriented consumption. There are still gaps in the high-quality supply of life services such as childcare, elderly care, and domestic services, which do not yet match the speed of consumption upgrades. Regarding consumption expenditure, certain gaps exist between regions and between urban and rural areas. Only by increasing the intensity of institutional reforms related to labor remuneration, taxation, and social security can we effectively promote the rapid release of domestic demand potential hidden within new-type urbanization and coordinated regional development.
The influence of Chinese brand value and quality standards on the global high-end consumer market remains insufficient, and high-value-added links such as creative design and post-sale service markets are not yet fully developed. Local protectionism and market fragmentation still hinder the smooth flow of factors over a wider range, and there is low-end homogeneous duplication of construction and disorderly price competition. The coverage of the new infrastructure network is still insufficient; compared to the expectations of entering the era of intelligent consumption and accelerating the construction of a smart mega-market, the efficiency of interconnection is still not high enough.
IV. Measures to Accelerate the Construction of a Strong Domestic Market during the "Fifteenth Five-Year Plan" Period
Looking ahead to the "Fifteenth Five-Year Plan" period, expanding domestic demand in China offers both space and potential. We must persist in taking the expansion of domestic demand as a strategic base point, closely combining the improvement of people's livelihoods with the promotion of consumption, and "investment in things" with "investment in people." We must strengthen the support of domestic demand and stimulate new growth points for it, accelerating the transformation of the resource advantages of the domestic ultra-large-scale market into industrial competitive advantages. Promoting a virtuous interaction between supply and demand to achieve a dynamic equilibrium at a higher level is the important practical path for transforming the domestic market from large to strong.
We must thoroughly implement special actions to boost consumption, continuously expanding service consumption and promoting the expansion and upgrading of commodity consumption. First, we should start by promoting employment, increasing income, and stabilizing expectations to enhance residents' consumption capacity. At the same time, we should increase government spending on social welfare to reduce the "worries for the future" [8] that inhibit household consumption.
On the supply side, we should relax market access restrictions in the life services industry, clear unreasonable restrictive measures, and promote the integrated innovation of multiple sectors such as culture, tourism, sports, agriculture, commerce, and wellness. We need to create attractive new consumption scenarios, formats, and models, vigorously cultivating new growth points. For high-value durable consumer goods, we should strengthen the leadership of brands and standards, promoting upgrades toward being high-end, intelligent, and networked. Specifically, we should enhance the global reputation of independent Chinese brands, pushing more "China-chic" [9] brands that embody Chinese culture to adapt to the diverse needs of domestic and overseas markets, researching products that meet market needs and improving service quality. At the same time, we should further promote the expansion, quality, and efficiency of the domestic consumer market through measures such as expanding inbound consumption, attracting the return of high-end consumption from abroad, and deeply cultivating domestic "sinking markets" [10].
Expanding effective investment is an important aspect of enhancing the developmental benefits of the domestic market. By the end of the "Fourteenth Five-Year Plan," China's annual fixed-asset investment has reached 50 trillion yuan. Looking toward the "Fifteenth Five-Year Plan" period, there is still room for investment in improving livelihoods, bridging weak links, and cultivating new momentum. It is necessary to continue optimizing the structure of government investment, increasing the proportion of government investment in people's livelihoods, and promoting the high-quality construction of "Two Major" [11] projects, implementing a batch of major landmark projects that benefit the present and the long term. The Proposals particularly emphasize that "investment in things and investment in people must be closely combined." Adapting to changes in population structure and migration trends, improving the layout of infrastructure and public service facilities, and strengthening investment in human resource development and all-around human development are matters of considerable necessity and urgency.
We must resolutely break down the sticking points and bottlenecks that impede the construction of a national unified large market. Only with "the whole country acting as a single chessboard" [12] to build a unified large market can we smooth the national economic macro-circulation and drive the transformation of the domestic market from large to strong. China's negative list for market access has already been reduced from...
The number of items was reduced from 151 in 2018 to 106 in 2025; barriers hindering the smooth flow of factor resources continue to be dismantled, and significant progress has been made in the construction of a unified national market during the 14th Five-Year Plan period [13]. However, a gap remains when compared to the goal of building an even stronger domestic market. Looking ahead to the 15th Five-Year Plan period [14], improving the high-standard market system, enhancing the completeness of institutional rules, and accelerating the modernization of market supervision and fair competition governance will help fully release the institutional dividends of China’s unified national market construction. The Recommendations [15] emphasize the need to unify basic market systems and rules, break down local protectionism and market fragmentation, unify market supervision and law enforcement, and strengthen antitrust and anti-unfair competition enforcement and justice. Simultaneously, it proposes refining supporting systems—such as statistics, finance and taxation, and performance evaluation—that favor the construction of a unified national market.
We must fully stimulate the vitality of various types of market entities and improve the mechanisms for the market-based allocation of factors. The Chinese market is a large-scale market that is global-oriented and fully open; it must attract and aggregate high-quality global factor resources through the advantages of brand quality and its institutional environment. Taking data factors as an example, it is particularly crucial to improve basic data factor systems, build an open, shared, and secure national integrated data market, and deepen the development and utilization of data resources. Regarding the stimulation of market entity vitality, the Recommendations deploy the implementation of the Private Economy Promotion Law to guarantee, via law and institutions, the equal use of productive forces, fair participation in market competition, and the effective protection of legitimate rights and interests. This will develop and strengthen the private economy, emphasizing measures such as improving long-term mechanisms for private enterprises to participate in major project construction, with goals to stimulate the vitality of private investment and increase its proportion. This will provide stronger endogenous momentum for the comprehensive expansion of domestic demand.
We must coordinately advance the construction of a modernized infrastructure system and a high-standard market system. During the 15th Five-Year Plan period, continuing to advance major infrastructure projects that benefit both the present and the long term, accelerating the expansion and quality enhancement of market infrastructure, and improving integrated circulation rules and standards to connect various market facilities at a high standard will help further reduce logistics costs for the whole of society. We should focus on "patching the shortboards" [16] of infrastructure in key areas, elevating the level of infrastructure modernization, and strengthening the organic connection and coordination between municipal public infrastructure and major project networks such as energy, transportation, and water conservancy. At the same time, we must develop resource trading platforms with clear positioning and wide radiation, build trading hubs with international influence, and formulate unified trading rules and standards.
In particular, we must follow the trend of the times to create new scenarios and new types of infrastructure networks that support "AI Plus" and the Internet of Everything (IoE). We must accelerate the 5G-A (5G-Advanced) networking and 6G testing processes to prepare for wider-scale promotion and application. We should speed up the intelligent transformation of land, sea, and air transportation facilities that match the commercial use of new technologies such as Intelligent Connected Vehicles (ICVs) and low-altitude intelligent networks. Furthermore, we must establish and improve new mechanisms for inclusive and prudent supervision [17] adapted to the development of land-sea-air all-space intelligent unmanned systems, build a unified standard application system in the field of intelligence, and promote large-scale commercial use in real-world scenarios in cities where conditions are ripe.
(Author: Deputy Director and Researcher, Institute of Economics, Chinese Academy of Macroeconomic Research)
Source: Red Flag Manuscript (Hongqi Wengao), Issue 21, 2025
Editor: Huihui