Consumption seen boosting economic vigor
In 2023, China will focus on expanding domestic demand and give priority to restoring and expanding consumption, and continue to strengthen household consumption abilities, improve consumption conditions and make innovations in more consumption scenarios, according to the plan outlined at the Central Economic Work Conference in December — the yearly meeting that sets plans for China's economic performance this year.
Culture and tourism, elder care and childcare, medical care, education, sports, leisure and other service-based consumption sectors have become new hot spots and growth points of urban and rural consumption patterns, and the growth rate of service consumption has continued to be higher than that of commodity consumption, said Wang Wei, head of the market economy research institute at the Development Research Center of the State Council, China's Cabinet.
"There is ample room for the growth of domestic demand led by consumption expansion. Consumption has become the biggest driver and potential source to help boost domestic demand," Wang said.
By 2025, final consumption is expected to account for 60 percent of the annual GDP, and the final consumption scale is likely to reach about 90 trillion yuan ($13.3 trillion), Wang predicted.
Final consumption is defined as the total amount of goods and services bought and used in an economy.
In addition, the outline made clear that the government will help increase urban and rural household incomes through multiple channels and support the improvement of housing conditions. The country will also continue to support purchases of new energy vehicles.
The meeting said government investment and policy incentives should be applied to effectively drive investment in all of society. It also called for speeding up the implementation of major projects during the 14th Five-Year Plan (2021-25) period, and strengthening infrastructure connectivity between different regions.
"There is sufficient room for boosting consumption growth on the demand side. The government could consider issuing temporary measures to subsidize employees and further reduce burdens facing enterprises. It could also help boost household consumption demand by issuing consumption vouchers on a larger scale and in more diversified forms," said Lian Ping, chief economist at Zhixin Investment and head of the Zhixin Investment Research Institute.
The government has provided subsidies for sales of NEVs and smart home appliances in rural areas. From January to October, sales of electric and plug-in hybrid passenger vehicles totaled 4.43 million units, up 107.5 percent year-on-year, and NEV market share had exceeded 25 percent, said the China Passenger Car Association.
"The increase in the spending of consumer goods such as household appliances and automobiles is key to helping expand consumption," said Yang Chang, an analyst at Zhongtai Securities.
In another development, duty-free consumption in Hainan province has gradually recovered from the impacts of COVID-19. Fueled by the free trade port under construction, Hainan has been continuing to play an important role in China's consumption.
Major duty-free operators have increased their investment in the tropical island. In late October, China Duty Free Group opened a new shopping complex in Haikou, the provincial capital.
Major domestic retailer Wangfujing Group plans to launch a new duty-free mall in Wanning, Hainan, this month. After its launch, the number of offshore duty-free malls in the province is expected to reach 12, which will give full play to the role of consumption in driving economic growth in Hainan.
In the first half of 2022, due to sporadic resurgences of local COVID-19 cases, the offshore duty-free shopping market in Hainan was negatively affected. Since late June, sales began to resume a year-on-year growth trend, according to China Tourism Group, parent of China Duty Free Group, the world's largest travel retailer in terms of sales revenue.
"China's consumer market is one of the largest and most promising markets globally. The fundamental role of consumption in boosting economic growth in China will not change," said Wang Haimin, president of China Tourism Group.
"With further construction of Hainan FTP, its potential is immeasurable. We are fully confident in the growth potential of the offshore duty-free shopping market in Hainan and will continue to increase investment there," Wang said.
