China is placing greater emphasis on optimizing the investment structure, especially investment in people. The fourth plenary session of the 20th Central Committee of the Communist Party of China adopted the recommendations for the 15th Five-Year Plan (2026–30), underscoring the coordinated push to improve people's livelihoods and boost consumption, while strengthening the integration of investment in physical assets and investment in people.
Moreover, the Central Economic Work Conference in December emphasized the need to continue expanding domestic demand and improving investment efficiency, while further strengthening the integration of investment in physical assets with investment in human capital as part of the overall strategy for economic work in 2026.
From a socioeconomic perspective, shared development and common prosperity depend on reaching a certain level of per capita gross domestic product, but rising incomes alone do not guarantee either goal. Experience suggests that countries with narrower income gaps tend to pursue stronger redistribution policies.
Expanding social spending, increasing the supply of public goods, and promoting more equal access to basic public services through redistribution are essential to advancing common prosperity and form the core focus of investment in people.
In this context, stepping up investment in people does not mean weakening the principle of doing the best within its means in improving people's livelihoods. Rather, it represents an effort to apply this principle at a higher level and in a more dynamic manner.
As the economy enters a more advanced stage, breakthroughs led by artificial intelligence are expected to significantly boost labor productivity, highlighting the growing need to ensure that productivity gains are more widely shared. Meanwhile, the main constraint on economic growth has shifted from the supply side to the demand side, with consumption becoming an increasingly important driver. Unlocking momentum on both sides therefore requires greater investment in people to strengthen human capital and advance all-round human development.
In parallel, such people-centered investment should follow a family-centered approach, as childbirth, human capital development, consumption and eldercare all take place mainly at the household level. This makes the family a natural focus for investment in human capital, basic public services and other livelihood areas.
Targeting families directly helps ensure that investment not only improves human capital and living standards, but also achieves a better balance between fairness and efficiency. Accordingly, government measures that promote family development should be included in the scope of investment in people and supported with greater public spending.
As human capital development and improvements in people's wellbeing involve a wide range of areas, including childbirth, education, employment, training and eldercare, advancing investment in people through the provision of public goods should extend across public services and livelihood sectors, benefit all population groups, and span the full life cycle.
First, building a fertility-friendly society requires stronger and more sustained policy support to stem the decline in births and gradually lift the fertility rate. Data from the seventh national population census show that China's total fertility rate — the average number of children a woman is expected to have over her lifetime — fell to 1.3 in 2020 and has continued to edge lower since then. This places the country below the 1.5 threshold that demographers often describe as the "low-fertility trap", where a rebound becomes increasingly difficult.
At the same time, China's declining fertility reflects both broader socioeconomic change and the legacy of earlier birth-control policies, suggesting that some families still have unrealized childbearing intentions. Translating this latent demand into actual births, however, requires policy support to reach a critical scale — sufficient to ease real-life constraints on households and create meaningful incentives for childbearing.
Second, the demographic transition presents an opportunity to better align and pool resources for human capital development, thereby lifting overall levels of human development. Smaller cohorts naturally ease pressure on education systems, while the uneven timing of population decline across age groups creates scope for more strategic reallocation of resources.
For instance, shrinking kindergarten enrollment frees up capacity that can be redirected toward expanding childcare services, helping ease the burden on families. Moreover, underutilized capacity in primary and junior secondary schools can support efforts to extend compulsory education. At the same time, fewer secondary vocational schools and students make it easier to shift resources toward vocational training, supporting a gradual increase in the statutory retirement age.
Making such resource rebalancing effective, however, requires reforms toward more integrated management, breaking down institutional barriers that impede cross-sector coordination in funding and resource allocation.
Third, addressing structural employment imbalances affecting key groups — especially young people and older workers — requires the creation of more high-quality jobs. The widening urban income gap is also a reflection of the latest shifts in labor market conditions. Such structural mismatches tend to push up the natural rate of unemployment, reduce labor force participation, and make gig employment more prevalent.
These pressures fall disproportionately on young people and older workers, whose employment rates remain well below the overall average. Among young people, the challenge is persistently high unemployment; among older workers, it is declining participation. As artificial intelligence reshapes labor demand at an accelerating pace, these mismatches are likely to become even more pronounced. Accordingly, more resources should be directed toward public employment services, ensuring that workers receive continuous support throughout their working lives.
Finally, greater emphasis should be placed on leveraging redistribution tools, including taxation, transfer payments and social security, to meaningfully narrow income gaps and promote more equal access to basic public services. Experience at home and abroad suggests that bringing income disparities within a reasonable range — for example, keeping the Gini coefficient, an important indicator reflecting the degree of income inequality, below 0.4, and the urban-rural income ratio below 2.0 — requires robust redistribution on top of primary income distribution.
Progress in expanding equitable access to basic public services also hinges heavily on well-designed transfer payment mechanisms.
In practice, taxation and transfer payments constitute the core instruments of redistribution. The strength of redistribution can therefore be assessed using two key indicators. One is the share of redistributive taxes — including personal income tax, corporate income tax and capital gains tax — in total tax revenue, referred to here as the tax share. The other is the ratio of government expenditure to GDP, referred to as the government spending ratio.
To conclude, during the 15th Five-Year Plan period, China should better understand the stage-specific characteristics of its economic development and fully recognize the necessity and urgency of investment in people, in order to promote adjustments in development concepts and policy approaches. Placing investment in people as a key policy priority will help unlock consumption potential, guide effective investment, consolidate the foundation of domestic demand, and further strengthen endogenous growth drivers.
The writer is chief expert at the National High-end Think Tank under the Chinese Academy of Social Sciences.
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