A Golden Age for China’s Con­sump­tion

A fast- grow­ing and in­creas­ingly open Chi­nese con­sumer mar­ket is mak­ing great con­tri­bu­tions to the world rld econ­omy.

China Pictorial (English) - - Contents - Text by Chen Qiqing

With so­cial­ism with Chi­nese char­ac­ter­is­tics en­ter­ing a new era, the Chi­nese econ­omy has ush­ered in a new de­vel­op­men­tal phase. One es­sen­tial fea­ture of the new phase is the coun­try’s eco­nomic shift from high-speed growth to high- qual­ity devel­op­ment. To re­al­ize high- qual­ity devel­op­ment, im­prov­ing de­mand pat­terns and steer­ing the ever- grow­ing im­pact of con­sump­tion on the econ­omy are greatly im­por­tant. It is not a stretch to say that China’s econ­omy has ar­rived at a con­sump­tion- driven era. This era fea­tures at least three ma­jor traits: First, con­sump­tion has be­come an im­por­tant im­pe­tus for China’s eco­nomic devel­op­ment. Sec­ond, China’s con­sump­tion is be­ing up­graded. Medium-high­end con­sump­tion is rapidly ris­ing and new con­sump­tion pat­terns are mush­room­ing. Third, China’s con­sump­tion has be­come a new driver for global eco­nomic growth.

Big­gest Eco­nomic Driver

From the per­spec­tive of de­mand, the three driv­ers of eco­nomic growth are in­vest­ment, con­sump­tion, and ex­ports. In a ma­ture econ­omy, con­sump­tion is the ma­jor driv­ing force for eco­nomic devel­op­ment and con­trib­utes about 70 per­cent of to­tal eco­nomic growth. In­suf­fi­cient con­sump­tion had been a per­sis­tent prob­lem for China. Af­ter the 18th Na­tional Congress of the Com­mu­nist Party of China (CPC) in 2012, China’s con­sump­tion started to take off and grad­u­ally sur­passed in­vest­ment to be­come the big­gest eco­nomic driver. Con­sump­tion con­trib­uted 47 per­cent of China’s eco­nomic growth in 2013, lower than that of in­vest­ment. How­ever, since then, the con­tri­bu­tion of con­sump­tion to the econ­omy has been con­sis­tently in­creas­ing. In the first half of 2018, con­sump­tion con­trib­uted as much as 78.5 per­cent of China’s eco­nomic growth.

Cur­rently, China’s con­sump­tion rate is also steadily ris­ing. The con­sump­tion rate is the ra­tio of fi­nal con­sump­tion ex­pen­di­tures to a coun­try’s to­tal GDP and serves as an im­por­tant in­di­ca­tor to as­sess con­sump­tion’s role in a coun­try’s eco­nomic devel­op­ment. In the early days of China’s re­form and open­ing up that started in the late 1970s, the coun­try’s con­sump­tion rate

wit­nessed a de­cline, largely due to a drop in house­hold con­sump­tion rate. In 1983, the coun­try’s fi­nal con­sump­tion rate was around 67 per­cent. The fig­ure dropped sharply in the years to come. It slightly re­bounded be­tween 1994 and 2000, but went down again be­tween 2000 and 2010. Af­ter 2010, the fig­ure picked up again and reached 53.6 per­cent in 2017.

Look­ing to the fu­ture, cer­tain el­e­ments will con­tinue to raise the con­sump­tion rate and make con­sump­tion the pri­mary driver for China’s eco­nomic growth.

First, ever-in­creas­ing in­come will pro­mote growth of con­sump­tion. In re­cent years, the growth rate of Chi­nese res­i­dents’ in­come has risen steadily, con­tin­u­ously sur­pass­ing that of the econ­omy. The coun­try’s na­tional in­come per capita is pre­dicted to ex­ceed US$10,000 soon. At the same time, China has en­tered a pe­riod of nar­row­ing the in­come gap. More bal­anced in­come is con­ducive to con­sump­tion growth. Since the 18th CPC Na­tional Congress, China has been in­vest­ing more in poverty al­le­vi­a­tion projects. The mil­lions who are lifted out of poverty will be­come new en­gines for con­sump­tion growth.

Sec­ond, China’s on­go­ing ur­ban­iza­tion process will sub­stan­tially pro­mote con­sump­tion. At present, room for China’s ur­ban­iza­tion is still huge. In the next 10 years, a to­tal of 130 mil­lion ru­ral res­i­dents will be re­lo­cated to cities, which is ex­pected to in­crease con­sump­tion by two tril­lion yuan ( US$288.5 bil­lion). A large mi­grant pop­u­la­tion can be found in China’s ur­ban ar­eas, who also pro­mote con­sump­tion as a group.

Third, China’s ever-im­prov­ing so­cial se­cu­rity sys­tem will free up more house­hold sav­ings to be fun­neled to con­sump­tion. Pre­vi­ously, the coun­try fea­tured a high sav­ing rate and a low con­sump­tion rate. Most Chi­nese res­i­dents save money with the pri­mary pur­pose of cov­er­ing pos­si­ble fu­ture med­i­cal ex­pen­di­tures or us­ing the money as pension. Since the coun­try has been vig­or­ously im­prov­ing its so­cial se­cu­rity sys­tem in re­cent years, con­sump­tion is ex­pected to go up with the ex­pan­sion of the so­cial se­cu­rity net­work and the im­prove­ment in so­cial se­cu­rity ser­vices.

Fourth, pref­er­en­tial poli­cies have cre­ated a sound en­vi­ron­ment for con­sump­tion up­grades. Since the 18th CPC Na­tional Congress, China has been at­tach­ing greater im­por­tance to con­sump­tion. The re­port de­liv­ered at the 19th CPC Na­tional Congress in 2017 em­pha­sized that China would im­prove sys­tems and mech­a­nisms for stim­u­lat­ing con­sumer spend­ing and lever­age the fun­da­men­tal role of con­sump­tion in pro­mot­ing eco­nomic growth. In 2018, the Chi­nese gov­ern­ment is­sued Sug­ges­tions on­im­prov­ing Sys­tems and Mech­a­nisms for Stim­u­lat­ing­con­sump­tionto Pro­mote Spend­ing­po­ten­tial­sof Res­i­dents and Im­ple­men­ta­tion Plan­for Im­prov­ing Sys­tems and Mech­a­nisms­forstim­u­lat­ing Con­sumer­spend­ing(2018-2020) in suc­ces­sion.

China’s Con­sump­tion Fu­els Global Growth

China is now en­ter­ing a new round of con­sump­tion up­grad­ing, and its con­sump­tion is ex­hibit­ing new fea­tures. These new fea­tures in­clude ex­pen­di­tures re­lated to liveli­hood grow­ing slowly while spend­ing on devel­op­ment and leisure ris­ing quickly. Con­sump­tion in ser­vices has wit­nessed fast devel­op­ment. The qual­ity of Chi­nese peo­ple’s spend­ing is im­prov­ing, shift­ing from low-medium to medium-high-end con­sump­tion. At the same time, new pat­terns of con­sump­tion have de­vel­oped fast, with in­ter­net con­sump­tion, mo­bile con­sump­tion, green con­sump­tion, shar­ing con­sump­tion and credit con­sump­tion all re­al­iz­ing sound growth.

Rapidly grow­ing Chi­nese con­sump­tion will pro­mote sus­tain­able devel­op­ment of the Chi­nese econ­omy, make greater con­tri­bu­tions to the world econ­omy, and be­come an im­por­tant new driver for global eco­nomic growth.

Chi­nese con­sump­tion’s con­tri­bu­tion to the world is pri­mar­ily made through the coun­try’s im­ports. Since 2009, China has been the world’s sec­ond largest im­porter of goods for nine con­sec­u­tive years. The coun­try is also the fastest- grow­ing ma­jor mar­ket for im­ports around the world. Take the ser­vices trade as an ex­am­ple: From 2013 to 2017, the cu­mu­la­tive ser­vices im­ported by China reached US$2.1 tril­lion with an an­nual growth rate of 10.7 per­cent, far ex­ceed­ing its ex­ports’ 2.5 per­cent growth rate.

China serves as the largest im­porter for many coun­tries and of many com­modi­ties glob­ally. It is the largest im­porter of oil, agri­cul­tural prod­ucts, and bulk com­modi­ties in the world. It is also ex­pected to be­come the world’s largest nat­u­ral gas im­porter in 2018. China’s im­ports fuel the devel­op­ment of many re­source-based economies, and the Chi­nese mar­ket is tremen­dously im­por­tant to these coun­tries.

To­day, trade pro­tec­tion­ism is ram­pant around the world. Some coun­tries have locked their do­mes­tic mar­kets through var­i­ous mea­sures. Rather than shift­ing to­wards pro­tec­tion­ism, China is fur­ther open­ing, es­pe­cially its con­sumer mar­ket, to the out­side world. Chi­nese Pres­i­dent Xi Jin­ping has pledged on many oc­ca­sions that China will im­port com­modi­ties and ser­vices worth US$10 tril­lion in the next five years and make ma­jor con­tri­bu­tions to the world’s sta­bil­ity and growth. Held in Shang­hai from Novem­ber 5 to 10, the China In­ter­na­tional Im­port Expo is the first state-level expo with im­ports as its cen­tral theme. It is sure to pro­vide bet­ter means for var­i­ous economies to share the fruits of China’s fast-grow­ing con­sumer mar­ket.

June 4, 2018: The 2018 Chongqing In­ter­na­tional Chil­dren’s Ed­u­ca­tion and Prod­ucts Ex­hi­bi­tion. China’s ed­u­ca­tional mar­ket for kids has de­vel­oped rapidly, es­pe­cially in the larger cities. IC

Septem­ber 12, 2018: Con­sumers look at a new prod­uct by Dyson, a renowned British home ap­pli­ance tech­nol­ogy com­pany, in Beijing. At present, the qual­ity of Chi­nese peo­ple’s spend­ing is im­prov­ing, shift­ing from low-medium to medium-high- end con­sump­tion. IC

May 15, 2018: A cus­tomer shops for im­ported food at a su­per­mar­ket in Nan­chang City, Jiangxi Prov­ince. China serves as the largest im­porter of many com­modi­ties for many coun­tries glob­ally. VCG

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