The state is stepping in, and major stimulus measures for county-level consumption are about to be launched.
I recently came across a counterintuitive observation: while some shopping malls in first-tier cities are struggling to attract foot traffic, discount retail stores, chain tea shops and rural open-air markets in many county seats are quietly expanding. Many people call this "consumption downgrade", but more accurately, it is a structural shift in China's domestic demand. The next driver of growth, in my opinion, should shift from "urban height" to "county-level density".
Recently, 9 departments including the Ministry of Commerce jointly issued the *Opinions on Further Stimulating the Vitality of the Sinking Market and Invigorating County-level Consumption*, with 18 measures covering channels, business formats, supply, circulation, employment, finance and land use. From the policy perspective, this is a "consumption promotion" document; but in fact, what it really aims to do, besides delivering goods to rural areas, is to carry out a series of asset optimization for the county-level economy.
Therefore, if we only regard counties as the "sinking market", we will misinterpret the recent policies in a superficial way.
Counties are not "small cities"
There are 1,869 county-level administrative regions outside municipal districts in China, with vastly different operating environments.
The policy clearly implements classified targeted measures: counties with dense population and strong economy will pursue "quality improvement and leading development"; counties with moderate population and economic scale will pursue "consolidating foundation to tap potential and empowering with unique features"; counties with small population and small economic volume will pursue "basic public service guarantee".
However, many people misinterpret these three categories as "developed counties copy urban models, medium-sized counties pursue unique features blindly, and small counties only maintain basic public operation".
Following this wrong logic, county-level consumption will become a lagged version of urban consumption, which imitates step by step from cities, then county seats, and then towns and townships.
This is the biggest misjudgment.
Counties are not reduced versions of cities, they belong to a consumption operating system completely different from that of cities.
Urban commerce relies on high-density traffic, stranger transactions, standardized replication, rent control and sales per unit area; county-level commerce relies on acquaintance trust, repurchase and word-of-mouth effect, local supply chain, low rent and high user stickiness.
The "local knowledge" mentioned by Hayek is more intensive and irreplaceable in counties than in cities.
Bargaining in a rural open-air market understands what local people need better than algorithmic recommendation of any commercial APP.
Therefore, the essence of classified policy implementation is not to rank counties by development level, but to recognize three distinct ecological niches.
The problem of strong counties is not "lack of consumption places", but consumption outflow to higher-level cities; the risk of medium-sized counties is not "no unique features", but blind homogeneous replication in the name of pursuing unique features; the bottom line of small counties is not "pursuing grand and high-end commercial projects", but delivering express services to every village and covering all basic public services.
Different ecological niches cannot be applied with the same set of urban commercial templates.
This is why the policy emphasizes "resolutely avoiding a one-size-fits-all approach", "preventing blind construction and resource waste", and "avoiding large-scale demolition and construction as well as low-level homogeneous competition".
These statements used to be regarded as regular principled announcements, but in the current context of county-level commerce, they are actually measures to prevent urban operation logic from eroding county-level practical characteristics.
Consumption is an outcome, not a policy tool
In economics, there is a basic formula, that is, Consumption C = Autonomous Consumption a + Marginal Propensity to Consume b × Disposable Income Yd. Policies can improve the consumption environment, but what really determines long-term consumption potential is the growth and stability of residents' disposable income.
County residents do not lack willingness to consume, but the increment and expectation of disposable income are not stable enough. Friedman's "Permanent Income Hypothesis" has long reminded that people generally do not make long-term consumption plans according to temporary income. Generally speaking, people make consumption decisions based on long-term average income expectations. One-off consumption vouchers and short-term subsidies can create a temporary consumption pulse, but hardly change long-term income expectations. What can really change expectations is stable employment, sustained asset appreciation and diversified income sources.
In the past, the consumption potential of counties was locked for a long time, and one important reason was that the balance sheets of county residents were extremely unhealthy.
In terms of income structure, county residents are highly dependent on wage income (from migrant work in cities) and operating income (from agriculture and small local businesses), with property income accounting for a very low proportion.
Rural homesteads, rural houses and collective construction land have long lacked liquidity, and cannot be mortgaged, traded, or generate stable cash flow.
A person's house is worth 300,000 yuan, but it may be regarded as having zero effective credit in the eyes of traditional banks.
There is a signal in this policy that represents a huge institutional change: the state begins to allow stock real estate or land to be used to develop county-level people's livelihood industries such as elderly care and childcare, and such industries can even enjoy transition support that the land use subject and planning conditions will not be changed within 5 years; support rural collective operating construction land to enter the market in accordance with the law to develop county-level commerce; encourage the use of idle rural houses to develop new industries and new business formats. These measures essentially "unlock" the property income of county residents.
When an idle rural house can be legally converted into a homestay, workshop, warehouse or live streaming studio, it changes from a sunk asset to an asset that can generate continuous cash flow.
Once assets can be priced, circulated and mortgaged, residents' balance sheets will start to be repaired.
Consumption potential is not "dug out" through short-term stimulus, but "repaired" through systematic asset optimization.
Therefore, the underlying logic of the county-level consumption policy is not "forcing you to spend more money", but actually "enabling your assets to generate income, making your income more stable, and making your future more predictable".
Moreover, when people talk about county-level finance in the past, they tend to fall into two extremes: either saying that financial institutions are unwilling to expand their business to county areas, or calling for massive expansion of consumer credit. But the real financial repression does not lie in "insufficient capital supply", but in "unpricingable underlying assets".
There are a large number of entities in counties that "have assets but no recognized credit": farmers have land and houses, but it is difficult for them to get traditional mortgages; small merchants have stable operating cash flow, but no standardized financial statements; upstream and downstream entities in the supply chain have real orders, but lack effective credit transmission channels.
If consumer credit for residents is simply promoted, it is equivalent to continuing to add leverage to the weak end of the balance sheet, which is not only unsustainable, but also may overdraft residents' future income.
There are two core details in this policy: first, qualified commercial circulation enterprises that newly open chain stores in counties can apply for discount interest on entrepreneurship guarantee loans. Second, support commercial circulation enterprises to build flexible supply chains with "self-owned brands + production based on actual demand", and encourage supply chain enterprises to provide county-level retail entities with services including demand forecasting, logistics optimization, inventory management, and bulk customized procurement.
The financial logic behind this is to shift credit evaluation from "single individual entity" to "the whole supply chain". A small supermarket owner may not have qualified collateral, but if he is connected to a chain brand or supply chain platform, his orders, inventory and accounts receivable will become identifiable, monitorable and priceable credit assets. Financial institutions no longer face an isolated micro and small entity, but a complete industrial chain with real data, physical goods and continuous cash flow.
This is the real direction of county-level consumer finance: instead of issuing direct loans on the C-end, it improves liquidity through B-end supply chain finance and asset side optimization.
The arrangements in the policy such as mixed-use land supply, transfer of flexible tenure periods, and allowing 15% of county industrial land to accommodate living service facilities, are ostensibly "land supply", but essentially "creating more mortgageable and operable assets".
Only when underlying assets can be reasonably priced can county-level finance achieve long-term sustainability.
Breaking the "New Price Scissors"
Furthermore, the old urban-rural price scissors refer to the phenomenon that agricultural products are sold at low prices while industrial products are bought at high prices, leading to wealth continuously flowing from rural areas to cities. If county-level consumption only "sinks" the excess capacity and low-quality goods from cities, a new price scissors will be formed — counties will become passive inventory digestion sites, the total retail sales of consumer goods data will look good, but the real welfare of residents may not be improved.
Therefore, in addition to financial support policies, the state has clearly proposed to promote "equal access to the same quality and same products" for both urban and rural areas, support domestic trendy products to enter county markets, cultivate a group of "new craftsmen", and build "village live streaming academies".
These are tangible redistributions of commodity pricing power.
For example, in the past, the farm-gate price of a characteristic agricultural product in a county might only be a quarter of the terminal market price. Due to the lack of cold chain facilities and unobstructed circulation channels, farmers had almost no bargaining power. The policy supports the construction of origin warehouses, farm-gate markets, cold chain storage and fresh-keeping facilities, which essentially returns part of the pricing power from urban distributors to county-level producers. Once agricultural products can be pre-cooled, sorted and refrigerated at the origin, farmers will have more turnover time and bargaining space, and will no longer be forced to sell their products at low prices at the farm gate.
Similarly, the expansion of application scenarios of "village live streaming academies" and rural e-commerce enables county-level products to bypass the traditional multi-layer distribution system and be priced directly for end consumers.
County-level tourism, health care, folk custom experience and local event economy even attract urban residents to consume in counties, with local services priced reasonably at local level.
Wealth will no longer only flow from counties to cities, but part of it will remain in local economic circulation.
Because the sustainable release of consumption potential cannot rely on county residents overdrafting their savings, nor on the one-way sinking of urban excess goods. It requires counties to change from "the passive object of being consumed" to "the active subject of consumption", and from "passively receiving goods" to "independently setting prices".
The biggest hidden advantage of county-level commerce is the low transaction cost brought by the acquaintance society. Urban commerce builds trust through traffic, algorithms and advertisements, while county-level commerce builds trust through word-of-mouth, repurchase and recommendations from relatives and neighbors. The latter develops slower, but much more stable.
Many chain brands failed when expanding to counties, not because counties have no consumption power, but because they only copied the storefronts, not the local social relationships. If a national chain convenience store enters a county, only hanging the unified brand sign and unifying the shelves without integrating into the local supply chain, social network and consumption rhythm, it is very likely to be defeated by local family-run stores.
Because family-run store owners remember whose child is going to have a birthday, and which elderly person likes to drink milk powder of what specific brand.
The policy proposes "one license for multiple locations", simplifies approval procedures, and prohibits setting explicit or implicit barriers for cross-regional operation of chain enterprises, which of course is conducive to chain operation and standardization. But on the other hand, the policy also emphasizes "developing small stores, time-honored brands and workshop-style brands that carry local culture", and supports "cross-border co-branding" and "new craftsmen" projects.
This shows that policy makers are very clear that the vitality of county-level commerce does not only come from unified chain operation, but also from localized and non-standard micro-innovations.
At the very least, counties should not all become "small versions of Wanda Plaza".
If a medium-sized county blindly builds large commercial complexes and introduces the so-called "first stores in the region" without matching the local population and actual consumption base, it is very likely to end up with rising commercial vacancy rates and increased local fiscal debt.
The policy proposes to dynamically adjust layout guidelines in combination with commercial vacancy rates, which is a pragmatic response to such potential risks.
Final Notes
The county-level consumption potential has never been an undeveloped "traffic depression".
It is the underlying operating system of China's domestic demand, carrying 70% of the national population and about 60% of the total retail sales of consumer goods.
The release of its potential cannot rely on campaign-style stimulus, nor on the simple replication of urban commercial templates.
The truly valuable path is to improve three balance sheets at the county level: the resident balance sheet to make employment more stable and assets reasonably priceable; the government and collective balance sheet to revitalize idle resources and avoid new unreasonable fiscal debt; the enterprise balance sheet to let supply chain credit replace traditional collateral and reduce institutional operation costs.
The value of the 18 policy measures lies not in how much "real money and silver" it provides, but in that it exerts efforts from both the supply side and the demand side, and leaves enough room for local governments to test new approaches. At least, it recognizes that counties have heterogeneous development conditions, that consumption is the natural result of income growth, that assets optimization is more important than simple subsidies, and that local knowledge is more effective than unified rigid standards.
I believe that if the implementation does not deviate from the original intention, county-level consumption will follow a different growth curve from that of cities. It is not achieved by overdrafting residents' wallets, but by asset appreciation, diversified income, return of pricing power and local trust realization.
County seats are not leftover warehouses for cities, nor transition zones for rural revitalization, they are the next main battlefield of China's domestic demand.
The highest state of unleashing county-level consumption potential is to enable county residents to stay in their hometowns, keep capital circulating locally, activate idle assets, and live a secure life.
At that time, county-level consumption will no longer need external "stimulus", it will grow on its own in a sustainable way.
This article is from the WeChat official account "Dongzhen Strategy", author: Dongzhen Strategy, and published with authorization from 36Kr.