On Tuesday (20th), the Chinese Communist authorities issued five consecutive policy documents in hopes to expand private investment and boost consumption. However, many of them are upgraded versions of existing policies, including the addition of a 500 billion yuan private investment guarantee plan and the promotion of “street vendor economy.” Experts believe that systemic economic stagnation is difficult to change, and China must undergo structural reforms such as income distribution and improved social security to truly expand domestic demand, boost consumption, and enhance employment.
On Tuesday (January 20th), the Chinese Ministry of Finance and the People’s Bank of China, along with other departments, jointly released five financial policy documents to boost consumption, expand domestic demand, stimulate private investment, covering areas such as consumption, investment, and small and micro enterprises. However, these policies are not entirely new, most of them have been in place for some time. It’s just that amidst China’s sluggish economic growth, weak consumption, sluggish private investment, and external challenges in European and American exports, the intensity and scope of the implementation of these policies have been heightened.
Among the documents issued this time are the “Notice on Optimizing the Implementation of Individual Consumer Loan Fiscal Subsidy Policy” and the “Notice on Optimizing the Implementation of Loan Subsidy Policy for Service Industry Entities.” The State Council of China had previously issued similar notices on August 12, 2025: “Implementation Plan for Loan Subsidy Policy for Service Industry Entities” and “Implementation Plan for Fiscal Subsidy Policy for Individual Consumer Loans.”
The service industry subsidy period remains at one year, with an annual interest subsidy rate of 1 percentage point, and the maximum loan amount has been increased to 10 million yuan (RMB, the same below). The period for individual consumer loan subsidies also remains no more than one year, with an annual interest subsidy rate of 1 percentage point, but the implementation period for fiscal subsidies for individual consumer loans has been extended to the end of 2026, and the support scope has been expanded.
Furthermore, there are overlaps in the five policy documents. According to the newly released “Notice on the Implementation of Loan Subsidy Policy for Small and Micro Enterprises,” the subsidy plan provides for an annual interest subsidy of 1.5 percentage points, with a maximum subsidy period of 2 years and a maximum subsidy loan size of 50 million yuan per household. Most service industry entities also fall under the category of small and micro enterprises.
For instance, the “Notice on the Implementation of the Special Guarantee Plan for Private Investment” was launched as early as September 2018 when the National Financing Guarantee Fund (National Fund) was initiated to support financing for small and micro enterprises, agriculture, rural areas, and innovation. According to official figures from the Chinese Communist government, in 2025, the National Fund’s newly generated re-guarantee cooperation business amounted to 1.47 trillion yuan.
This time, a special guarantee plan with a total amount of 500 billion yuan has been added, with a two-year installment plan, to be used for the construction of consumption scenarios such as catering, accommodation, health, elderly care, childcare, and home services. The national financing guarantee fund’s risk-sharing ratio has been raised from 20% to not exceeding 40%, with the compensation cap only increased from 4% to 5%.
Sun Guoxiang, a professor in the Department of International Affairs and Business at Nanhua University in Taiwan, believes that the background of the Chinese government launching this policy is the collapse of private investment in China. He said, “In 2025, the decline in private investment widened to a historical low, reflecting corporate uncertainty about policies, low returns, and extreme debt pressure.”
Sun Guoxiang believes that the central government’s exposure of local fiscal exhaustion through financing guarantees and banks’ worries about loan recovery requires national backing to dare to lend. Although the GDP barely met the target in 2025, domestic demand plummeted sharply. The introduction of policies implies the failure of the strategy to expand domestic demand and shifts focus towards the last line of defense for ensuring people’s livelihoods and employment.
According to official data released by the Chinese National Bureau of Statistics on January 19th this year, national fixed asset investment by private entities decreased by 6.4% compared to the previous year in 2025, with a 1.13% month-on-month decrease in December, accelerating the long-term decline in private investment.
The so-called special guarantee plan with a total amount of 500 billion yuan, compared to the 300 billion yuan real subsidy scale of the “two new” policies in China in 2025 (large-scale equipment renewal and new consumer products), only lowers the threshold for financing loans for small and micro-enterprises, far from effectively stimulating the economy.
Both Sun Guoxiang and David Huang, an economic scholar based in the United States, believe that the 500 billion yuan financing guarantee plan targeted at small and micro-enterprises by the National Fund has limited effectiveness in reversing the confidence crisis and addressing the real problems facing the Chinese economy.
In an interview with Dajiyuan, Sun Guoxiang analyzed that the 500 billion yuan accounts for only about 0.4% of China’s total fixed asset investment in 2025, and these funds are used for technological transformation and expansion of small and micro-enterprises, overlooking the drag from the real estate sector and the downturn of enterprises. Private investment has consecutively shown negative growth, and policies struggle to stimulate genuine demand.
David Huang, on the other hand, believes that while the initiative may provide some relief, it is primarily a band-aid solution and unlikely to change the overall trend. Such programs merely transfer a portion of credit risks to the government, reducing the financing barriers for small and micro-enterprises, but also exposing deeper issues.
“Private investment is not lacking policies but confidence and returns. Most profitable businesses are now done by state-owned enterprises, leaving other companies with little to gain,” Huang noted. Additionally, the transmission effect of China’s monetary policy is not smooth, and banks exhibit a conservative risk appetite.
Sun Guoxiang concluded that this policy symbolizes Beijing’s anxiety to maintain growth, but it cannot overcome systemic stagnation. Long-term solutions require deepening reforms rather than subsidies.
David Huang added that such tools are defensive measures to prevent a slowdown, not engines for accelerated growth.
In addition, the Chinese state media recently praised the “street vendor economy” supported by former Premier Li Keqiang, stating that “street vendors not only enrich the supply significantly but also have low entry barriers and strong flexibility,” “boosted by new media means such as live streaming and short videos, the street vendor economy has entered a new stage.”
Both Sun Guoxiang and David Huang believe that this is a temporary expedient under the tide of unemployment and may provide short-term buffering, but it is not a sustainable solution.
According to official data, as of November 2025, the national urban unemployment rate in China was 5.1%, and the youth unemployment rate for those aged 16-24 was 16.9% (excluding students), indicating structural issues in the employment market and pressure from the influx of college graduates.
“In the face of a tide of unemployment, Beijing lacks better solutions to stabilize employment and is promoting low-threshold measures to ease social pressure,” Sun Guoxiang remarked. Street vendors can indeed create some jobs; in 2020, they absorbed hundreds of thousands of low-skilled workers. However, it easily leads to intense competition, meager income, and is not a sustainable solution.
Moreover, “this kind of carpet economy cannot absorb 12 million mainland Chinese college students or high-end talents; it can only supplement marginal positions in the service industry, unable to boost consumption or GDP growth. Learning from historical lessons, especially the backlash following the promotion in 2020 due to concerns about the so-called ‘unsanitary cities,’ quick suspension, and subsequent reimplementation highlight the policy dilemma,” he added.
David Huang pointed out that the street vendor economy can create income opportunities but only for a small part, struggling to offer a large quantity of high-quality jobs. He stated, “It’s more like a buffer zone under the pressure of employment, a temporary solution to address urgent employment needs. However, in the long term, it is not suitable for stabilizing society.”
Additionally, the street vendor economy faces two issues: most positions are low value-added, low security, and unstable. It also tends to bring about urban governance challenges and intense competition.
“If there’s a constant need to rely on street vendors for stable employment, it means formal employment is generally insufficient, and domestic demand is severely lacking. We can say that the street vendor economy can only provide emergency relief but cannot address structural employment opportunities,” Huang emphasized.
Xu Chenggang, a senior researcher at Stanford University’s China Economic and Institutional Research Center, has reiterated in recent years that China’s economic consumption insufficiency is caused by the authoritarian system of the Chinese Communist Party. He once stated, “The fundamental issue facing China’s economic development is the basic (political) institutional problem,” and insufficient domestic demand is a common feature of authoritarian regimes.
He believes that the Chinese Communist Party has taken away the lion’s share of economic gains through land and banks during its development. To resolve the problem of insufficient domestic demand and ensure that household income does not form a disproportionately low share of GDP, privatization is necessary, as observed in any part of the world.