China is expected to promote trade-in programs in the short term and people-centered new-type urbanization in the long run to boost household spending, thereby injecting more vitality into economic growth, Liu Jing, chief China economist at HSBC Global Research, told China Daily in an exclusive interview.

Reforming the hukou system, also known as household registration, to better integrate rural migrants into urban economies, as well as diversifying market offerings are essential to stimulating the economy's internal vitality for long-term stable growth, Liu said.

"The ongoing large-scale equipment upgrades and trade-in programs for consumer goods have been highly effective to result in significant sales growth across all product categories," said Liu, adding that China will likely strengthen trade-in programs in the short term to promote household consumption.

"I think that this year's trade-in programs will focus on three key initiatives: including more products and services to the program, allocating more funds — last year 150 billion yuan ($20.52 billion) was offered as subsidies, streamlining the policy framework to simplify subsidy application procedures, such as consolidating information processing to save application time, while enabling both online and offline participation," Liu said.

From a long-term development perspective, Liu said that reforms to advance urbanization should deepen, with particular focus on improving the welfare of migrant workers in cities.

"Migrant workers in cities are enjoying less public services such as schooling and medical treatment than urban residents with household registration. These costs reduce the amount of money available for consumption, limiting their spending capacity," she said.

In the medium to long term, new urbanization reforms can prioritize providing public services based on permanent residence rather than hukou — as the resolution adopted at the third plenary session of the 20th Central Committee of the Communist Party of China in July 2024 said. That will help unlock migrant workers' purchasing power and help tap into consumption potential, Liu added.

Besides, the respective contributions for funding public services by central and local governments are anticipated to undergo a revision and subsequent improvement, said Liu.

"For example, migrant workers should be entitled to more public services in their place of residence. Policies should shift from allocating resources based on household registration to distributing them according to the actual residency," she said.

Additionally, Liu said the debut economy, which introduces new products, ideas and business models, will allow companies to enjoy good profits for a period of time — rewarding innovation, while offering consumers innovative goods and services that can drive consumption.

Through tapping into diverse consumer needs and demands, the debut economy can also help mitigate unnecessary excessive peer competition among producers. It can even spur consumption upgrades in certain industries, she said.

"Some companies, in pursuit of short-term profits, engage in cutthroat competition to maintain or increase market share," Liu said. "This is not conducive to long-term development, because that may reduce R&D spending. The focus should be on strengthening the debut economy to create demand and break the vicious cycle of excessive price competition.

"After the pandemic, some people said there is a so-called consumption downgrading, yet, for instance, high-end bicycles are still in high demand, with some costing more than 50,000 yuan each. This indicates that China's middle and high-income consumers will buy high-end products and services, if the market offers them what they want or need," she said.

The latest data from the Ministry of Commerce showed that sales of key retail and catering enterprises in China increased by 4.1 percent year-on-year during the Spring Festival, China's most important annual holiday. The movie box office reached a record high of 9.51 billion yuan.

In particular, sales of household appliances and communication equipment from retail enterprises that are monitored by the ministry jumped more than 10 percent year-on-year.

Dong Yilang contributed to this story.