China Revamps Service Fund to Boost Consumption and AI
China’s Ministry of Finance and Ministry of Commerce have jointly revised the Service Industry Development Fund Management Measures, extending the fund through 2028 and placing the “accelerated cultivation of new consumption growth points” as its top funding priority. The revised framework, signed on May 15 and publicly released in early June, allocates approximately 6.9 billion yuan ($950 million) for 2026 to support service sector expansion, with a notable new emphasis on deploying artificial intelligence in consumer-facing industries, as reported by People’s Daily.
Context: A Sector Driving Economic Growth
The service industry has become China’s largest economic contributor, reaching a total scale of 80.9 trillion yuan in 2025 and accounting for 61.4 percent of GDP growth. The government has set a target for the sector to exceed 100 trillion yuan by 2030 under the State Council’s guidance on service industry expansion and quality improvement, according to the official government document.
The revised Measures replace the 2023 version (Cai Jian [2023] No. 9), which was set to expire this year. The extension to 2028 signals Beijing’s long-term commitment to supporting the service sector as a cornerstone of its domestic demand-driven growth strategy.
Key Changes: New Priorities and Allocation Methods
The updated framework introduces several significant changes. The three support areas now list “accelerating the cultivation of new consumption growth points” first, encompassing quality and affordable service consumption, stimulating consumption vitality in lower-tier markets, and promoting the普及应用 (widespread adoption) of AI and other emerging technologies in the consumer sector, as detailed by First财经 (Yicai).
The fund’s allocation methodology has also been restructured. For local development support using the factor-based method, “service industry development and related work” now carries a 60 percent weight, up from 20 percent for work foundation under the old system. Budget execution and fund management account for 30 percent, with regional倾斜 (targeting) at 10 percent.
Management authority has been streamlined, consolidating oversight under the Ministry of Finance and Ministry of Commerce rather than involving multiple industry authorities as before.
Expert Perspectives
He Daixin (何代欣), Director of the Fiscal Research Office at the National Academy of Economic Strategy, Chinese Academy of Social Sciences, told People’s Daily that the revised Measures “enrich the ways of fund support, focus on expanding capacity and improving quality of the service industry, and reflect the central fiscal fund’s role in supporting and driving the development of the service industry.”
Han Wenlong (韩文龙), Vice President and Professor at the School of Economics, Southwestern University of Finance and Economics, noted that the explicit inclusion of AI in consumer sectors “reflects the orientation of promoting technology-empowered consumption upgrading.” He emphasized the importance of “reasonable allocation, timely issuance, and usage management of fiscal funds” to maximize the fund’s effectiveness.
Broader Policy Framework
The revised Measures are part of a coordinated policy push in 2026 to boost domestic demand. In January, the State Council issued the Work Plan for Accelerating the Cultivation of New Growth Points in Service Consumption (Guo Ban Fa [2026] No. 2), identifying six key areas including transportation services, domestic services, network audiovisual services, and inbound consumption, as published on the government website.
In April, nine departments jointly issued the 2026 Work Plan for Quality and Affordable Service Consumption Action, focusing on service consumption infrastructure upgrades and民生 (people’s livelihood) areas such as elderly care and childcare, as covered by Xinhua News Agency.
The 2026 Government Work Report allocated 250 billion yuan in ultra-long-term special government bonds for trade-in programs and 100 billion yuan in special funds to promote domestic demand.
Analysis and Implications
The revised Measures represent a strategic alignment between consumption stimulus and technological advancement. By explicitly tying AI adoption to consumer sector development, Beijing is signaling that technology deployment is not just an industrial policy goal but a consumption-driven one.
The shift in allocation weights creates stronger incentives for local governments to actively develop their service sectors to compete for central funding. However, with the 2026 budget of approximately 6.9 billion yuan slightly down from 7.279 billion in 2025, there may be tension between expanding support scope and maintaining fiscal discipline.
The focus on stimulating consumption in lower-tier markets (下沉市场) aligns with the government’s broader strategy to reduce urban-rural consumption gaps and tap into the消费 potential of smaller cities and rural areas.
What to Watch
Key questions remain about how the specific allocation of funds across provinces will be determined in practice, which AI-in-consumption projects will be prioritized, and whether the fund’s scale is sufficient to meaningfully impact consumption patterns given the service economy’s 80.9 trillion yuan size. The performance-oriented evaluation system will place higher demands on local authorities to design and implement effective projects, making implementation quality a critical factor in the policy’s success.