In 2025, ‘invest in people’ was a standout buzzword in the Government Work Report, resurfacing at the Fourth Plenum and the Central Economic Work Conference.
Calling to ‘invest in steel and concrete—but in people too’, Xi Jinping first hinted at the phrase in 2023. By the early 2020s, the PRC was up against the first hard edges of economic transition and structural strain, alongside lingering COVID impacts. Rising gig work, jobless youth, property and debt crackdowns, and rapid ageing have driven a shift away from relying on abundant, cheap young labour towards investing in human capital for technology‑driven ‘high quality development’.
From the late 1990s to the mid‑2010s, physical asset investment was the major growth driver. Building infrastructure, upgrading industry and advancing urbanisation all depended on massive, sustained capital spending, noted Bian Yongzu 卞永祖 Renmin University Chongyang Institute for Financial Studies. As the economy enters a new stage, this model’s marginal returns are weakening, and human capital is becoming the key constraint.
Addressing this constraint requires a paradigm shift towards investing in health and careers across education, employment, healthcare, social security, and other livelihood sectors. Channelling more funding and resources into ‘investment in people’ stores up momentum for long‑term growth and turns individuals into sustainably appreciating ‘human capital’, argues Jin Lin 金李 Peking University’s National Finance Research Centre.
‘invest in people’ and ‘invest in physical assets’
The December 2025 Central Economic Work Conference marks a shift from chasing sheer speed of growth to prioritising development quality and sustainability, comments Tian Xuan 田轩 Tsinghua National Institute of Financial Research. According to Tian, the global tech race now focuses on people and skills. Countries can only achieve true tech independence by investing more in their workforce and improving workers’ skills and innovative skills.
Jin likens investing in people to software; investing in physical assets to hardware. Building infrastructure creates jobs quickly, while investing in people takes time but builds long-term growth. Real quality growth happens when these two work together—physical investments should develop human capital, and skilled people should drive infrastructure improvements.
consumption vs investment
Investing in human capital could unlock a larger pool of household spending and build a more competitive workforce in strategic emerging industries.
In recent years, PRC household consumption has accounted for about 39 percent of GDP, while gross capital formation has hovered around 41 percent; globally, household consumption averages roughly 57 percent of GDP and gross capital formation about 27 percent.Weak domestic demand—above all, consumer spending—is a major constraint in the PRC economy, notes Sheng Zhaoxun 盛朝迅 Xi Jinping Economic Thought Research Centre.
‘Investing in people’ aims to turn the market potential of over 1.4 billion people into growth momentum, notes Chi Fulin 迟福林 China Institute for Reform and Development. Economic work in 2025 prioritised ‘boosting consumption, improving investment efficiency and broadly expanding domestic demand’. It can lift households’ confidence and willingness to spend, Chi argues. He sees the new paradigm as paving the way for domestic demand‑led, consumption‑driven growth as the backbone of stable expansion over the next decade.
upskilling the workforce
Education is central to nurturing innovative next-gen workers. AI education has already been rolled out for younger students, while adults can access training to upgrade skills. An early March 2025 initiative targets new productive‑forces sectors, such as digital talent and advanced manufacturing, as well as urgent livelihood fields, such as aged care and domestic service.
A further Guiding opinion aims to expand the technical workforce from 2025 to 2027, encouraging firms and vocational schools to join up on training in advanced manufacturing, the digital and low‑altitude economies.
‘Degree worship’ should be dismantled, urges Tian; evaluations should prioritise capability over credentials and potential over seniority. The next step is to build development pathways for workers across education levels and occupations, and to allow employers to set flexible hiring conditions to better match candidates with positions.
‘the old and the young’
In an ageing society struggling with unemployed youth, ‘investing in people’ policies are gravitating towards ‘the old and the young’—two groups most in need and most disadvantaged in the labour market. Large language models have sharply reduced the value of entry‑level skills in many white‑collar roles, observes Cai Fang 蔡昉 Chinese Academy of Social Sciences. At the same time, older workers face a digital skills divide. Cai calls for more resources so workers can access public employment services throughout their working lives.
Beijing aims to ease burdens around childbirth, childcare, education and aged care. By lifting the quality of childcare and education, investment is flowing to a ‘high quality’ next generation—smaller in number but stronger in health and skills. More emphasis is placed on expanding paediatric drug development and including the elderly in clinical trials of innovative drugs.
Childcare subsidies began allocating C¥3,600 per child per year in July 2025, the first nationwide parental subsidy. The State Council also released Opinions on gradually introducing free preschool education to lower education costs. Beijing is expanding access to its best universities to maximise the next generation’s educational success.
The aged‑care strategy seeks to build community‑based services while turning care into a consumption opportunity through the silver economy. A long‑term care and nursing care consumption subsidy has been rolled out for disabled older people.
increasing income
Labour income accounted for 73 percent of workers’ pay in the PRC in 2024, making higher earnings one of the main levers for boosting consumption. The 2024 Central Economic Work Conference called for ‘raising incomes for lower‑middle income groups’, while the 2025 agenda notes ‘formulating plans for lifting urban‑rural incomes’. Zhang Xiaojing 张晓晶 Chinese Academy of Social Sciences, National Finance and Development Laboratory, highlights a shift in principle and greater operability in income‑growth policy.
Previous policies for low-middle income groups focused on safety nets; the current direction aims at broad income gains for all urban and rural residents, says Yang Weimin 杨伟民 13th CPPCC Standing Committee. Yang sees this as a first major turn in income policy that will later translate into specific targets and measures.
Concrete steps are already visible. An initiative to boost consumption puts raising urban‑rural income at the top of its agenda; Opinions on improving public well-being call for higher minimum wages; and MoHRSS has issued skilled-talent minimum-wage guidelines to clarify minimum pay for technicians by skill level.
Tech sector performance gains, combined with worry about losing highly skilled workers—above all, top talent in large language models—have prompted major firms to act as poaching spiked among local and international firms.
In December 2025, giants like ByteDance, JD.com, Dreame, CATL, and BYD announced major pay increases. JD’s year-end bonus climbed over 70 percent year-on-year. ByteDance raised its bonus budget by 35 percent and expanded its annual salary adjustment budget by 1.5 times.
Wage rises have extended into manufacturing. Battery leader CATL raised base salaries uniformly by ¥150 per month effective 1 January 2026.
but the constraints...
Lack of funds, mainly at the local level, is the major constraint. Over 60 percent of cities have not fully rolled out free final‑year preschool education; among the four municipalities, only Beijing has completed city‑wide subsidies, according to research by the Yiyang Education Research Institute Public Policy Research Centre. Weak local finances and short revenue cycles pose existential threats to private kindergartens, with over 90 percent of respondents reporting near‑term survival pressure.
Overall wealth accumulation in the PRC remains far below developed country levels. As the third‑pillar pension system grows, the insurance sector faces low interest rates, leaving returns unable to cover liabilities, notes Tong Boning 童伯宁 Aegon‑THTF Life Insurance. Less than half of eligible residents have opened individual pension accounts since their launch in December 2024.
Tsinghua economist Feng Runhuan 冯润桓 warns of another issue: a shortage of quality assets for ordinary Chinese to invest in. With fewer value‑preserving, capital‑guaranteed products available than before, households shoulder more investment risk.
Even for long-discussed hukou (household registration) reform, pensions and medical insurance are the hardest nuts to crack. Because these benefits rely heavily on fiscal subsidies and hukou reform mainly benefit the national macro picture, localities—as implementers of reforms—have weak incentives, Cai Fang points out. If urban hukou numbers expand sharply, local governments must shoulder higher social spending without reaping all the dividends. Hukou in megacities like Beijing and Shanghai brings major advantages in education, healthcare, and housing. Residents who have them, fiercely resist reforms allowing in newcomers.
next steps
Funding will be directed toward education, healthcare, aged care, and childcare to improve livelihoods, increase spending, and expand domestic demand. Research by Cai suggests that if hukou reform gave migrant workers equal access to basic public services, their consumption could rise by 27 percent. Yet the funding gap sits squarely between ambition and reality; even where public finances suffice, private investment and community buy-in must still be encouraged.
Sustained progress requires steady economic growth and follow-through at the local level. Investing in people pays off more slowly than building infrastructure—and experts warn that localities must break their addiction to quick wins.
‘people’ people
Cai Fang 蔡昉 | Chinese Academy of Social Sciences academician
Since the United Nations introduced the Human Development Index in 1990, the PRC has been the only country to move from the low human development group to the high human development group and is now progressing towards the very high human development category. The country’s rapid progress in the past was largely driven by fast economic growth and rising per capita GDP. Looking ahead, as economic growth slows, further improvements in human development will rely more on health and education.
With AI becoming a competitor to human labour, the government must shoulder more responsibility for financing projects that benefit society as a whole, and the share of public education spending in GDP should rise significantly.
According to international experience, as per capita GDP rises, the consumption rate tends to follow an ‘S-shaped curve’. A per capita GDP of around USD$14,000 marks the threshold from upper-middle-income to high-income status. Cai predicts that by 2026, the PRC’s per capita GDP would reach this level, suggesting that household consumption should then rise significantly.
Renowned demographer Cai took a PhD in economics from the Graduate School of the Chinese Academy of Social Sciences (CASS) in 1989. Rising to CASS vice president. From 2021, he was active on the PBoC Monetary Policy Committee, writing on labour economics, income distribution, and economic reform. Cai is currently the chief expert of CASS National Think Tanks and chair of the Silk Road Research Institute.
Huang Shisong 黄石松 | Renmin University National Academy of Development and Strategy senior researcher
‘Investing in people’ is essential for cultivating new productive forces, as AI and robotics surge. Tech gains track skill levels. Modern industries need steady, long-term and broad investment to close skill gaps. The aim must shift from swelling headcount to building real talent by lifting skills and quality across the board. This approach actively responds to the PRC’s moderately ageing society. As demographic dividends diminish, strategic human investment through vocational training can boost labour productivity while meeting evolving public needs, which creates new consumption growth points.
Spending on human capital, therefore, serves two ends at once. It speeds up tech progress in emerging fields while easing demographic strain. With the right mix of skills and social support, rising social costs can be turned into economic gains.
Huang Shisong is a senior researcher at Renmin University’s National Academy of Development and Strategy, directing the Centre for Ageing Industry Research. He advises national health and civil affairs ministries on aged care policy and urban development.
Bian Yongzu 卞永祖 | Renmin University Chongyang Institute for Financial Studies research fellow
Local governments often compete for business by offering generous investment incentives, but these policies have fuelled overcapacity in certain industries and wasted resources. In the future, regional development differences will increasingly depend on human capital and public service quality.
This shift will encourage greater investment in people, support equal access to basic public services, and promote the balanced flow of talent and resources. Strengthening these areas can also ease difficulties in attracting and retaining skilled workers, adding new vitality to the economy.
For people-first investment to work, policy must be carried through at every level. Industrial upgrading, tech progress and skills spending need to be joined up. Funds should be used with care, with an eye on long-term value rather than vanity projects or quick wins.
Research Fellow at Renmin University Chongyang Institute for Financial Studies, Bian’s research focuses on national macroeconomic policy. He has provided consulting services to multinational corporations and large state-owned enterprises across financial services, technology, media and telecommunications, pharmaceutical and manufacturing sectors.