Engel Coeffient Lowered along with Consumption Upgrading

Retail sales of consumer goods nationwide totaled RMB 38.1 trillion in 2018, an increase of nine percent year-on-year, said Gao Feng, spokesman for the Ministry of Commerce, recently. As a result, consumer spending contributed 76.2 percent to economic growth, 18.6 percentage points higher than 2017, and consumption remained the top engine driving China’s economy.

This consumption is, however, increasingly targeting fashionable, high-quality, energy-saving, and intelligent products. Imports of consumer goods also maintained rapid growth. In 2018, China’s imports of consumer goods increased by 10.9 percent over the previous year, according to customs statistics. In particular, as China’s policy of reducing import tariffs on consumer goods took effect, some consumer goods related to “consumption upgrading,” such as imported cosmetics and aquatic products, are experiencing rapid growth.

It is worth noting that the proportion of food expenditure (Engel Coefficient) has been further reduced. In 2018, per capita consumption of food, tobacco, and alcohol rose by 4.8 percent, accounting for 28.4 percent of the total spending. In contrast, service and entertainment consumption grew faster with higher quality.

Looking into the consumer market in 2019, Li Mingtao, president of the research institute at China International Electronic E-commerce Center (CIEEC), believes that the government is focusing on cultivating new consumption hotspots to further unleash consumption potential. In cities, tourism, catering, health, pensions, and other service-oriented consumer demand is surging.