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When China’s Politburo met on July 30 to set economic policy for the second half of 2026, the numbers in front of it were not good. In the first half of the year, retail sales grew just 1.3 percent from a year earlier, while the economy grew 4.7 percent. Consumer prices were up just 1 percent, about where they have been since February. A technology rally carried the stock market through the spring, but it broke in mid-July and was falling again as the Politburo convened.

The solution that the Politburo settled on is to double down on the strategy that Chinese President Xi Jinping had already set: deepening the “AI plus” initiative, developing new forms of the intelligent economy, pushing for breakthroughs in frontier technology, building new pillar industries, and pressing ahead with six national networks—from computing power to logistics—which the National Development and Reform Commission estimated in May would take more than 7 trillion yuan of investment this year alone.

When China’s Politburo met on July 30 to set economic policy for the second half of 2026, the numbers in front of it were not good. In the first half of the year, retail sales grew just 1.3 percent from a year earlier, while the economy grew 4.7 percent. Consumer prices were up just 1 percent, about where they have been since February. A technology rally carried the stock market through the spring, but it broke in mid-July and was falling again as the Politburo convened.

The solution that the Politburo settled on is to double down on the strategy that Chinese President Xi Jinping had already set: deepening the “AI plus” initiative, developing new forms of the intelligent economy, pushing for breakthroughs in frontier technology, building new pillar industries, and pressing ahead with six national networks—from computing power to logistics—which the National Development and Reform Commission estimated in May would take more than 7 trillion yuan of investment this year alone.

Missing from the Politburo’s strategy this year, however, are the “special initiatives to boost consumption” that anchored the July 2025 statement. The 2026 report instead tells officials to expand domestic demand by providing better supply tailored to different consumer groups and by boosting service consumption—echoing the prescriptions of the Politburo’s April statement. The original 2025 program instead survives one level down: The State Council’s five-year consumption plan, approved on July 13, tells officials to press ahead with it.

The usual description of the Chinese economy as K-shaped—tech and exports sail upward while consumption stalls—suggests an imbalance to be managed. Some analysts push the diagnosis further, describing China as a “slow tech dragon,” whose misallocation of resources produces both real breakthroughs and enough waste to slow the whole economy. In effect, both descriptions treat the household side as a casualty of error. The July statement points to another possibility. The neglect of the household is a top-down decision, a cost that the Chinese leadership has determined is worth paying for the sectors it counts on for national power.

The choice was made against a good deal of advice. In its 2024 review of China’s economy,........

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