China is fast becoming a production base and innovation hub for multinational corporations navigating an international landscape marked by rising protectionism and geopolitical tensions, officials and executives said. The world’s second-largest economy, increasingly underpinned by consumer demand, manufacturing strength and indigenous innovation, has shifted from the “growth at all costs” era to a model fueled by “new quality productive forces”. Premier Li Qiang said in mid-March that China will move with urgency and precision to deliver practical and effective policy measures that ensure rapid progress across all priority areas, to achieve its growth target. Expanding domestic demand through the boosting of consumption, as highlighted in the Government Work Report, is identified as the top priority for economic development. This approach shifts focus toward consumer-led growth to meet economic targets in the face of external uncertainties.
Han Wenxiu, Executive Deputy Director of the Office of the Central Commission for Financial and Economic Affairs, said the most important priority and most difficult challenge in the coming period will be to steadily increase the contribution of consumption to economic growth. “We must promote the formation of a development model driven more by domestic demand, propelled by consumption, and powered by endogenous growth,” Han said during the China Development Forum in late March. China’s household consumption, measured by household spending as a share of GDP, accounted for 39.9% of the economy in 2024, in contrast with developed economies, where the rate is typically 10 to 30 percentage points higher.
“China’s advantages as a super-sized market have not been fully leveraged,” Han said. “There is enormous potential for expanding consumption, especially service consumption.” Tourism, education, healthcare and cultural entertainment ranked as the top four categories in which households plan to increase spending over the next three months, while goods consumption ranked fifth. China is steadily advancing pilot programs to open key service sectors, including value-added telecommunications, biotechnology and wholly foreign-owned hospitals, as part of the country’s efforts to diversify service offerings and meet rising consumer expectations.
For foreign companies, this signals a widening range of avenues to engage Chinese consumers and integrate into the country’s evolving market ecosystem. “China’s latest five-year blueprint places a clear emphasis on expanding high-quality consumption, accelerating innovation and boosting domestic demand, which closely aligns with PepsiCo’s strategic focus,” said Ramon Laguarta, the company’s Chairman and CEO. “Many innovations inspired by traditional Chinese food culture and consumer insights have now successfully entered markets across Asia, and have even reached the United States and Europe,” Laguarta said. “China not only drives our growth, it is shaping our global future. “China’s digital ecosystem allows us to test our bold ideas with far greater efficiency than anywhere else – from AI-powered supply chains to e-commerce platforms,” Laguarta said. “We are constantly exploring new ways to serve consumers more effectively.”
PepsiCo is not alone. Across industries, a growing number of multinational corporations now view China not merely as a vast and rewarding market, but as a critical production base for enhancing supply chain resilience and a dynamic innovation ecosystem for deep collaboration, according to senior executives. “Whenever I come to China, I am impressed by the dynamism of this market. New technologies move quickly into practical use. Products reach the market fast. And in many industries, development takes place with remarkable speed,” said Stefan Hartung, Chairman of the Board of Management of the German multinational Bosch Group.
Commerce Minister Wang Wentao said that the country’s economic heft is underpinned by a comprehensive industrial system encompassing more than 200 mature industrial clusters that span everything from consumer electronics to advanced materials and new energy vehicles. Beyond industrial infrastructure, China’s human capital landscape, as highlighted by Wang, is undergoing a fundamental evolution – the country now possesses the world’s largest pool of scientists and engineers, with its full-time equivalent of R&D personnel ranking first globally. China’s innovation ranking has broken into the global top 10 for the first time, according to the Global Innovation Index 2025 released by the World Intellectual Property Organization (WIPO) in September. “After years of effort, China’s indigenous innovation capacity has crossed a critical inflection point. External forces cannot reverse our development trajectory,” said Han, from the Office of the Central Commission for Financial and Economic Affairs. “In areas where gaps remain, we will accelerate efforts to catch up. In areas where we have strengths, we will achieve running alongside and ultimately leading, striving to realize higher-level technological self-reliance,” he said, as reported by the China Daily.
