Investing in People: China’s New Growth Priority

For much of the past few decades, China’s economic ascent has been written into its skyline. High-speed rail lines, industrial parks, and vast housing developments were not merely symbols of growth—they were its primary engines. Now, Beijing is signaling a recalibration. The next phase of growth will rely less on what China builds, and more on where it invests.

At the recent Central Economic Work Conference, China’s policymakers highlighted a need to “combine investment in physical assets with investment in human capital.” Physical capital remains essential in an economy of China’s scale, but the hierarchy of priorities is changing, with human capital being elevated as a decisive driver of long-term growth.

The economic logic behind this recalibration is increasingly clear. Years of intensive investment in infrastructure and industrial capacity are delivering diminishing returns. Expanding supply through ever-larger capital outlays is proving less effective than it once was. At the same time, global competition has shifted toward talent. In areas such as artificial intelligence, biotechnology, and advanced manufacturing, the advantage is determined not by financing alone, but by skills, research depth, and the ability to translate ideas into productivity.

Despite its vast labor force, China’s highly skilled workers account for around seven percent of total employment. That is a modest base for an economy seeking to move up the value chain. Boosting consumption, meanwhile, requires more efforts to dispel uncertainty alongside providing incentives. Therefore, the key to expanding domestic demand lies in boosting confidence.

This is the context in which “investing in people” has taken on strategic weight. In practical terms, it means allocating more resources to education, employment, healthcare and social security, areas that shape both productivity and expectations. The scale of this commitment is substantial. In recent years, over 70 percent of China’s fiscal spending has been directed toward initiatives that improve public well-being. Starting from 2025, vocational skills training would be subsidized for over 10 million people annually for three consecutive years. And in 2025 alone, over 80 billion yuan (about US$11.2 billion) has been allocated in central government transfers to local governments for student aid.

Alongside education and training, policymakers are addressing factors that influence household behavior more subtly. Local governments are expanding access to higher-quality medical care, accelerating urban renewal, rolling out childcare subsidies, and increasing the supply of non-profit childcare services. These measures are not isolated welfare policies. Together, they are designed to enable households to spend.

The shift also reflects changing patterns of demand. As incomes rise, Chinese consumers are increasingly willing to spend on health, experiences, and personal development. Aligning investment with these preferences implies expanding supply in sectors such as healthcare, culture, tourism, insurance, and education. Over time, sustained investment in knowledge, health, and adaptability offers a route for China to turn its demographic dividend into a more durable talent dividend.

This, however, does not amount to a retreat from physical investment. Infrastructure and industrial capacity will remain essential to its economy. The emphasis is integration. Investment in physical assets is expected to serve human development, while investment in human capital can raise the productivity and returns of physical capital. When the two reinforce each other, growth becomes more balanced and more durable.

The longer-term direction is becoming institutionalized. The Communist Party of China (CPC) leadership’s recommendations for China’s 15th Five-Year Plan, covering 2026 to 2030, highlight “expanding domestic demand” and “investing in people” as strategic pillars. After over four decades of development featuring heavy investment, low-cost production, and export-led growth, China is working toward a model that relies more on the spending power and capabilities of its population.

For global businesses and investors, the implications are significant. Sectors linked to human development and domestic consumption including healthcare, education, insurance, digital services, green mobility, and cultural industries are likely to benefit from sustained policy support. As China deepens its focus on human capital, demand will grow for expertise in medical technology, vocational education, elder-care services, and other people-centered solutions. China’s further opening up, with a strong focus on service sectors, will offer increasing business opportunities with its massive market.

Investing in people may not produce rapid headline gains. Its returns are slower, but more structural. A healthier, more skilled population with stable incomes provides a firmer base for innovation, consumption, and resilience. Seen in this light, China’s shift from concrete to capabilities is not a break from its development story, but its next chapter—one that deepens the commitment to placing the welfare and potential of its people at the heart of economic planning. Rooted in a philosophy of people-centered development, this transition reflects both realism about past limits and confidence in future potential.

The author is a commentator with the Center for Europe and Asia of China International Communications Group (CICG).