Theoretical Logic, Transmission Mechanism, and Policy Measures for Boosting Consumption in the Capital Market
2026-07-13
In March 2025, the General Office of the Communist Party of China Central Committee and the General Office of the State Council issued the "Special Action Plan for Boosting Consumption", which clearly defined the supportive role of the wealth effect of the capital market on consumption. In June of the same year, the People's Bank of China and six other departments jointly issued the "Guiding Opinions on Financial Support to Boost and Expand Consumption", guiding financial institutions to strengthen financial services from both the supply and demand sides of consumption, meet the diversified financing needs of various entities, and further promote the expansion of high-quality consumption supply, helping to unleash the potential for consumption growth.
The logical relationship between capital markets and consumption. The inherent mechanism of the capital market boosting consumption is essentially to break through the two-way cycle of "asset appreciation income growth consumption capacity enhancement" and "financing support supply optimization consumption willingness enhancement" through the play of financial functions.
The correlation between income and consumption. Residents' consumption decisions are not based on current income, but on their long-term expected income, and asset value, especially financial assets, is an important component of sustainable income. According to income theory, consumption is a function of current disposable income. If asset factors are included in the consumption analysis framework, asset price fluctuations will directly affect the total wealth of consumers, thereby generating consumption budget constraints. The "wealth effect" brought about by asset appreciation and the "confidence effect" brought about by stable income expectations together constitute the core theoretical pivot for the capital market to boost consumption. When the capital market is in an upward trend, the value of financial assets such as stocks and funds held by residents increases, generating a psychological effect of "book wealth" growth, and consumer confidence and willingness will also increase accordingly. Some residents may choose to use the value-added income to purchase high-end consumer goods, improve living conditions, or increase leisure consumption expenses such as tourism, thereby directly driving consumption growth. On the contrary, if the capital market continues to be sluggish, residents will reduce non essential consumption expenditures and increase savings for emergencies. In recent years, although the proportion of property income to per capita disposable income in China has been increasing year by year, the overall level is still relatively low. In 2024, the per capita disposable income of residents in China will be 41314 yuan, while the per capita net income from property will only be 3435 yuan, accounting for only 8.3%, far lower than the 15% in the United States, indicating great room for improvement.
The empowering characteristics of capital markets on consumption. A sound capital market can improve the overall economic efficiency by reducing transaction costs, alleviating information asymmetry, and promoting rational allocation of resources, thereby promoting consumption from both the supply and demand sides. Generally speaking, the financial structure determines the level of financial development. The more perfect the financial structure is, the better it can adapt to the needs of different entities and have a stronger promoting effect on economic growth. The continuous development and improvement of the capital market have enriched residents' financial asset choices, such as stocks, funds, REITs (Real Estate Investment Trusts), etc., and diversified the risk of single savings returns, enabling residents to achieve wealth preservation and appreciation through asset allocation, thereby enhancing their consumption ability. At the same time, the capital market provides direct financing channels for enterprises, allowing them to invest more funds in innovative projects and capacity upgrades, thereby improving the quality of consumer goods, enriching the types of consumer goods, and creating and meeting consumer demand from the supply side. For example, snack companies have raised funds through A-share IPOs, investing in the research and development of sugar free snacks and high protein nuts. At the same time, they have launched sub categories such as children's snacks and elderly snacks, promoting the transformation of the snack industry from scale expansion to value cultivation, and better meeting the consumption needs of different groups of people. In addition, with the help of the capital market, enterprises can become bigger and stronger, create more high-quality job opportunities, and increase employee wages, thereby improving consumers' payment ability from the source.
The regulatory role of capital markets on consumption. The capital market can affect the total consumption and structure by regulating the equilibrium state between supply and demand. On the demand side, residents can effectively enhance their consumption capacity and unleash potential demand by sharing the growth dividends of enterprises through convenient consumer credit and investment in the capital market, such as purchasing stocks, funds, etc. On the supply side, through information transmission, enterprises can accurately capture changes in consumer demand. When the total demand expands, enterprises can use capital market financing to improve product production capacity, increase product supply, and promote product structure optimization, making supply more in line with the direction of consumer demand upgrading, avoiding mismatches caused by blind production, and achieving dynamic balance between supply and demand. For example, before 2020, due to insufficient production capacity, some popular models of new energy vehicles in China had to wait in line for 3-6 months. Subsequently, some car companies have significantly expanded their production capacity through capital market financing. In 2024, China's new energy vehicle production reached 12.888 million units, a significant increase from 1.366 million units in 2020. The supply curve has shifted significantly to the right, achieving a better balance between supply and demand. Of course, the capital market not only stimulates consumer demand, but also supports supply innovation, such as smart homes, digital services, etc., to create new consumer demand and achieve supply-demand balance at a higher level.
In addition, asset price fluctuations can effectively transmit to the consumption level by affecting residents' wealth levels, consumer confidence, and intertemporal consumption decisions. When stock prices, fund net values, and other factors rise, residents perceive an increase in wealth, which reduces concerns about the future, increases consumption tendencies, and even stimulates high-risk consumption behaviors such as entrepreneurship and high-end training. On the contrary, it will actively compress consumption. In short, the capital market and the consumer market do not exist in isolation, but are deeply intertwined through paths such as wealth, confidence, and profitability.
The transmission mechanism of capital market affecting consumption. The impact of the capital market on consumption is achieved through multiple transmission mechanisms. From a theoretical logic perspective, it can be divided into three major paths: demand side transmission, supply side transmission, and expectation transmission. The wealth effect on the demand side, financing support on the supply side, and confidence guidance on the expectation side are intertwined and influence each other, together forming a chain of "capital market economic subject consumption behavior".
The direct transmission mechanism on the demand side. According to the life cycle hypothesis, residents' consumption depends on their total wealth throughout their lifetime, including human capital, physical assets, and financial assets. The increase or decrease in wealth is transmitted to the consumption end through cross period budgeting mechanisms. When the prices of financial assets such as stocks, funds, and REITs rise and trigger the expansion of total wealth, the constraints on residents' consumption budgets are relaxed, and their marginal propensity to consume increases, which in turn drives their expenditures on optional consumption such as tourism and education. At the same time, the capital market not only increases residents' income through asset appreciation, but also optimizes residents' income structure and enhances long-term consumption capacity by creating employment and providing investment returns. Compared with wage income, the growth of property income, such as promoting listed companies to increase dividend payouts, can better enhance residents' long-term consumption confidence. In addition, residents' consumption, especially large-scale consumption, usually relies on credit support. After obtaining loans through mortgage assets, residents can quickly meet their large consumption needs. The capital market can broaden the sources of consumer credit funds by supporting consumer finance companies to issue financial bonds, asset securitization (ABS), and other means. At present, the proportion of consumer credit balance to GDP in China is still relatively low, and there is still considerable room for the release of consumer credit.
The indirect transmission mechanism on the supply side. The capital market can indirectly stimulate residents' consumption willingness and promote consumption growth by providing funds for enterprises, reducing financing costs, forcing governance optimization, promoting enterprise innovation of products, upgrading production capacity, and improving service quality from the supply side, creating new consumer demand. The direct financing function of the capital market, such as IPO (initial public offering), additional issuance, and bond issuance, can provide long-term, low-cost funds for enterprises. Among them, enterprises in high growth and high demand industries have better profit prospects and are more likely to obtain financing in the capital market, supporting their expansion of production capacity, promoting industrial upgrading, and launching higher quality products that better meet consumer demand, thereby eliminating consumption suppression caused by supply shortages. In addition, the capital market's requirements for corporate information disclosure and standardized governance will force companies to improve operational transparency and product quality, enhancing consumer trust among residents. The support of the capital market, especially the private equity and venture capital markets, for innovative consumer enterprises can stimulate their technological research and development and model innovation, stimulate new consumption growth points, and promote the rapid development of new consumer formats.
The forward-looking transmission mechanism of future expectations. Expectations are a key psychological factor that affects consumer behavior, and the capital market influences the expectations of consumers and businesses through its signaling function, thereby affecting consumption. As a barometer of the economy, the price fluctuations of the capital market converge the expectations of all market participants for the future. If the expected future capital market continues to improve, it will send a strong signal of optimistic macroeconomic prospects. Consumers will believe that future income and wealth will increase significantly, and consumer confidence and current consumption willingness will be greatly enhanced. On the contrary, if one is pessimistic about future expectations, their willingness to consume will decrease. Of course, the capital market will also guide enterprises to adjust their production plans through price signals. If they are optimistic about future expectations, enterprises will be more willing to make forward-looking investments, further expand production capacity, and better match supply with consumer expectations, injecting momentum into the sustained growth of the market. For example, the continuous rise of new energy vehicle stocks sends a signal to car companies that there is a strong demand for green consumption, which will encourage related car companies to increase their research and development and production efforts in electric vehicle models to better meet consumer needs.
It should be pointed out that the capital market consists of multiple sub markets such as stocks, bonds, funds, REITs, etc., which affect household consumption through different mechanisms, forming a multi-path and multi-level impact force. At the same time, the theoretical logic of leveraging the capital market to boost consumption is conditional, and its effectiveness is constrained by boundary conditions such as market structure, economic cycles, institutional environment, and the completeness of the social security system. Analyzing these influencing factors and boundary conditions, and optimizing institutional design in a targeted manner, is the key to unleashing the role of capital markets in boosting consumption.
Key measures to leverage the role of the capital market in boosting consumption. The capital market has enormous potential and unique advantages in boosting consumption. It is necessary to adopt a series of targeted measures, optimize the relevant systems of the capital market, and combine capital market reform with income distribution reform, social security system construction, etc. to meet the financing needs of consumer industries, effectively enhance residents' property income, and stimulate residents' consumption vitality.
Expand channels for property income and promote the appreciation of residents' wealth. One is to continuously deepen the reform of the investment side and promote the entry of medium and long-term funds into the market. Social security funds, enterprise annuities, occupational annuities, and other funds have the characteristics of large scale, long term, and high stability. Promoting their entry into the market can effectively optimize the market investor structure, reduce short-term market fluctuations, and consolidate the foundation of market development. At the same time, it is necessary to improve the regulatory system for public funds, perfect the product registration and review mechanism, optimize the fund investment operation process, cultivate a group of public fund products with excellent performance and stable style, and attract more resident funds to flow into the capital market. The second is to innovate diversified financial products to meet the differentiated property appreciation needs of residents. We will vigorously develop equity products such as stock funds, industry ETFs (exchange traded open-end index funds), and science and technology innovation board theme funds, continuously enrich stable bond funds, public REITs, and other products, promote product innovation in the three directions of stability, equity, and specialization, and provide more choices for investors with different risk preferences and return expectations. Thirdly, standardize investment and wealth management services to promote the healthy development of the capital market. Strengthen the supervision of financial institutions to ensure the stable operation of the financial system. Improve relevant laws and regulations, establish a solid compliance bottom line, and strengthen risk prevention and control. At the same time, establish and improve investor rights protection mechanisms to ensure that investors can fully understand relevant financial product information, enhance risk awareness and investment capabilities. Attract more residents to participate in the capital market for rational investment and increase property income.
Increase direct financing support to support the development of the consumer industry. One is to facilitate bond financing channels and support financing for consumer enterprises. Support eligible enterprises in the cultural, tourism, education and other service consumption fields to issue bonds. For example, educational enterprises can issue bonds for the purchase of teaching equipment and the training of teaching staff, which can inject funds into the development of education and indirectly meet the demand of residents for high-quality education services. The second is to support consumer finance institutions in issuing bonds and developing consumer credit business. For example, supporting consumer finance companies to issue financial bonds to raise more funds for providing consumer loans to consumers, thereby activating consumer potential. At the same time, regulatory authorities should strictly monitor the qualifications of bond issuers and the use of raised funds to ensure that bond issuance is standardized and orderly. Thirdly, we will vigorously develop equity financing business and support enterprises in the consumer industry chain. Support high-quality enterprises that meet relevant conditions in the production, channel, and terminal consumption industry chains to raise funds through methods such as issuing and listing on the New Third Board. Enable relevant enterprises to efficiently raise funds and use them to expand production scale, expand sales networks, and improve service quality.
Promote the development of consumer infrastructure REITs and stimulate consumer vitality. One is to establish and improve the screening and approval mechanism for consumer infrastructure projects, clarify project screening criteria, and accelerate the implementation of projects. For example, for warehousing and logistics facility projects, it is important to focus on indicators such as transportation convenience, warehousing capacity, and logistics efficiency. At the same time, simplify the project approval process and improve approval efficiency. A dedicated green channel for project approval can be established, and the "one-stop acceptance" model can be implemented. The second is to enhance the operational management level of consumer infrastructure REITs. Establish a professional operation and management team to develop differentiated operation strategies for different types of consumer infrastructure projects. Establish a stable income mechanism to ensure long-term returns for investors. Establish a sound operational performance evaluation system and strengthen supervision and assessment of project operations. The third is to guide funds to invest in the field of consumer infrastructure. Introduce policies such as fiscal subsidies and tax incentives to effectively reduce the cost of participating in REITs projects. For example, implementing tax exemption policies for dividend income of RE ITs projects, providing appropriate reductions and exemptions for value-added tax, income tax, etc. in the project transfer process, and attracting more investors to participate in investment through policy guidance.
Improve the relevant systems of the capital market and effectively maintain market order. One is to improve the information disclosure system and create a standardized and transparent capital market. Listed companies should disclose their financial status, operating results, major issues, and other information truthfully, accurately, completely, and timely. We can rely on digital platforms to build a special channel for information disclosure, allowing investors to easily access relevant information and make rational investment decisions in a timely manner. The second is to protect the rights and interests of investors and enhance their confidence in participating. Establish a dedicated investor compensation fund, clarify the rules and scope of fund compensation, and dynamically adjust it in conjunction with market development. When a listed company engages in illegal activities such as fraud and false statements, causing losses to investors, investors can obtain corresponding compensation through the compensation fund. At the same time, we will improve the mechanism for handling investor complaints, open up channels for safeguarding rights, and build an efficient and convenient complaint platform. The third is to improve the regulatory system and create a favorable capital market environment. Strengthen daily supervision of the capital market and build a multi-party collaborative regulatory framework. Intensify the punishment for illegal and irregular behavior in the capital market, so that the cost of such behavior far exceeds the potential benefits. Strictly investigate and punish illegal activities such as financial fraud, insider trading, and market manipulation, and shape the long-term healthy ecology of the market.
In short, we must fully leverage the role of the capital market in boosting consumption, clarify its transmission mechanism and practical path, effectively enhance residents' consumption capacity and potential, promote sustained prosperity of the consumption market, and use consumption prosperity to feed back enterprise development, enhance the sustainable development ability of enterprises, promote smooth economic circulation, and provide solid support for building a new development pattern in China and promoting high-quality economic development.(Outlook New Era)
Author: Liu Zhibiao (Executive Dean of Yangtze River Industry Development Research Institute, Nanjing University); Wang Maoxiang (Special Researcher)
Edit：Luoyu Responsible editor：Wang Erdong
Source：studytimes.cn
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