Comprehensive analysis indicates that the current insufficiency of China's domestic demand possesses characteristics of a transitional phase, representing a combined outcome where short-term and long-term issues intertwine, total and structural problems converge, and real factors intermingle with expectations, all underpinned by systemic and institutional influences.

First, the transformation of the development stage has led to a deceleration in the growth rate of domestic demand. This is the most significant factor affecting the change in China's domestic demand and aligns with general economic patterns. International experience shows that after a country's period of high-speed growth concludes, both investment and consumption growth rates typically enter a sustained decline, forming a transitional phase marked by longevity and volatility. A key indicator is a substantial slowdown in the growth rate of fixed asset investment; as the expansive construction typical of the mid-industrialization phase is largely completed, the scope and scale of large-scale foundational investment consequently contract. The investment slowdown triggers changes in employment and household income. Simultaneously, as basic material needs for most families are largely met, widespread foundational consumption begins to decrease, leading to a persistent slowdown in consumption growth. During this process, consumption structure upgrades drive a faster rise in demand for quality and services, while the supply structure struggles to adapt to these new changes, resulting in a coexistence of structural surplus and shortage. China's period of high-speed economic growth essentially concluded around 2012, the year GDP growth fell below 8%, marking a shift from high-speed to medium-high-speed growth. Confronting the legacy issues of the traditional high-growth model and the impact of structural supply-demand imbalances on domestic demand, the Central Committee of the Communist Party of China made major deployments, including deepening supply-side structural reforms, steering the economy towards high-quality development while averting significant economic fluctuations. However, it must be considered that the transformation of the development stage often induces insufficient effective domestic demand over a prolonged period, leading to an imbalance in the overall supply-demand relationship.

Second, the structure of income distribution impacts consumption growth. This is a structural and institutional factor contributing to insufficient consumption, with deep-rooted historical causes. The impact of an economic downturn on consumption varies significantly under different income distribution structures. According to relevant data, in the primary distribution of national income, the share of labor compensation in China's GDP and the share of household income in national income are both lower than in most developed economies. In 2024, the urban-rural income ratio in China remained at 2.34 times, reflecting a still substantial disparity in income distribution between urban and rural residents. Under conditions where survival and basic sustenance needs have been thoroughly met, an economic downturn exerts a greater impact on the income and consumption of low-income and lower-middle-income groups, causing consumption to contract more sharply than income. As these groups form the foundation and main body of China's current consumption landscape, impacts on their income and consumption can amplify the mutual reinforcement between economic downturns and consumption slowdowns. This is because, after entering the ranks of upper-middle-income economies, the consumption propensity of middle- and high-income groups enters a period of stability or low growth. Conversely, if consumption upgrades and expansion among middle- and low-income groups are constrained by income, it leads to an overall decline in consumption growth and increased difficulty in expanding consumption.

Third, the adjustment in the real estate market is impacting domestic demand. This acts as both a short-term factor exacerbating current insufficient demand and a medium-to-long-term issue influencing the trajectory of domestic demand. China's real estate market has traversed in just over two decades a path that took Western developed countries many real estate cycles to complete. Relevant data indicates that the per capita floor space of urban residents in China now exceeds 40 square meters, higher than in countries like Japan and France; the homeownership rate has reached 96%, with approximately 1.5 housing units per household, significantly higher than in Japan and the US. While the real estate sector previously played a crucial role in investment and economic growth, its current deep adjustment and downturn are significantly impacting fixed asset investment and negatively affecting household consumption. Therefore, in the short term, robust measures by central and local authorities to stabilize the real estate market will help enhance its resilience, allowing for a gradual release of oversupply pressure. In the medium to long term, altering the migratory pattern of urban-rural population flow, achieving full citizen status for over 200 million rural migrant populations, meeting the housing needs of new urban residents, addressing challenges in old residential areas such as parking, EV charging, and elevator installation, and promoting the construction of "quality housing" can further unleash the potential of the real estate market. However, this is likely to be a prolonged historical process.

Fourth, insufficient domestic demand, declining prices, and weakening expectations are mutually reinforcing. This involves the interplay of related variables within economic operations. The interaction among domestic demand, prices, and expectations most prominently affects consumer and investor confidence, leading to a magnified and prolonged downturn in domestic demand. Regarding the interplay between domestic demand and prices, insufficient domestic demand translates into an overall lack of aggregate demand, causing a decline in the general price level. Falling prices impact corporate operations and profits, which in turn affect employment and household income, leading to a slowdown in the growth of nominal consumption, nominal investment, and nominal GDP, and a passive increase in the macro leverage ratio, thereby exacerbating the lack of demand. Concerning the interplay between domestic demand and expectations, insufficient domestic demand itself negatively influences expectations. Expectations about the economic outlook directly affect individuals' expectations regarding employment, entrepreneurship, and income, creating obstacles and friction points for consumption and investment, and influencing spending and investment choices. Particularly for low-income and lower-middle-income groups, weakening income expectations lead to consumption contraction, generating chain reactions and amplification effects.