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Yet Li's plan to morph China“into a mega-sized consumer powerhouse on top of its solid foundation as a manufacturing power” should be the most important priority of the Xi era. As Li puts it,“this will bring vast markets to enterprises from all countries .”

On one level, Li talked of China's desire to be viewed as the protector of globalization as Trump goes tariff wild.“Economic globalization will not be reversed; it will only carve out a new path,” Li said.“We will further integrate and connect with the global market.”

He added that“we will not and shall not return to closed-off and isolated islands.” Li also said China is well-positioned to“move forward steadily, and continue to inject more stability and certainty into the world economy .”

Though Li was careful not to mention Trump, the US leader was written between the lines in bold font. Li urged“all parties to avoid the politicization of economic and trade issues.”

Vice Premier He Lifeng amplified Beijing's desire to“actively expand domestic demand to boost consumption,” as reported by the official Xinhua News Agency.

Li, meanwhile, played up China's advances in areas such as electric vehicles and artificial intelligence. He said China would“share indigenous technologies and innovative scenarios with countries around the world.”

Clearly, Li is referring to Washington's efforts to deprive China of advanced semiconductors and other high-tech equipment on national security grounds. Yet, as recent data reminds, China's real battle is with domestic consumers who save more than they spend.

There's not a moment to waste. For years, economists from East to West knew that China needed to prod consumers to save less and spend more. Unless Xi can truly pivot to a consumption-driven model , it will delay the moment when China surpasses the US in gross domestic product (GDP) terms. Or, even miss its chance to be the world's No 1 economy.

Chinese households are serious savers. That's becoming a headwind all its own at a moment when Beijing is less willing to stimulate GDP, local governments are focused on reducing debt and deleveraging, and China's export machine is facing a rocky global economy and rising protectionist walls to its products.

The PBOC's latest consumer survey, covering the October-December 2024 period, reports that 61.4% of Chinese mainlanders would rather save money than spend or invest it. This reading has been above 60% since late 2023.

For years now, the International Monetary Fund has been among those urging China to get serious about increasing the role of consumer spending.

As IMF economist Diego Cerdeiro puts it,“an ambitious but feasible set of reforms can improve these prospects, importantly in a way that is inclusive by raising the role of household consumption in demand. Reforms such as gradually lifting the retirement age to increase labor supply, strengthening unemployment and health insurance benefits, and reforming state-owned enterprises to close their productivity gap with private firms would significantly boost growth in coming years.”

It's not just China, of course. Brad Setser at the Council on Foreign Relations points out that“the combined savings of China, Japan, Korea, Taiwan and the two city-states of Hong Kong and Singapore is about 40% of their collective GDP, a 35-year high. No other region of the world currently contributes more to the global glut in savings that has brought interest rates around the world down to record lows.”

Setser adds that Asia's current account surplus – its excess of savings over investment – has increased significantly in the past two years and is now about as large, relative to the GDP of its trading partners, as it was prior to the global financial crisis of 2008.“Without a policy push to bring down savings,” he says,“East Asia's excess savings will continue to give rise to new economic and financial risks, both inside the region and globally.”

Generally speaking, China's 1.4 billion people sock away about one-third of income. That's roughly three times the average of American consumers. Deploying that cash is the key to China becoming a domestic demand-led powerhouse.

Consumption is the key to allowing Beijing to throttle back on fiscal policy and local governments to rely less on leverage. And it's central to phasing out the gigantic shadow banking system and letting the PBOC withdraw massive stimulus from the economy.