Roaring consumption engine drives China's economy – Xinhua

People visit the fourth China International Consumer Goods Expo in Haikou, capital of south China's Hainan Province, on April 13, 2024. (Xinhua/Guo Cheng)

BEIJING, April 20 (Xinhua) — China's consumption played a key role in boosting economic growth in the first quarter of this year, underscoring the country's steady shift toward a domestic consumption-driven economy.

China's gross domestic product expanded 5.3 percent year-on-year in the first quarter (Q1), with domestic consumption contributing 73.7 percent to economic growth, data from the National Bureau of Statistics showed earlier this week.

Rising service consumption, especially festival-related consumption, and continued structural improvement of household consumption are key highlights of the consumption sector.

New forms of consumption

China has seen the rapid development of new consumption patterns in a variety of sectors, from entertainment and tourism to the digital industry.

For example, city walks are a popular pastime for the Chinese. These walking tours include exploring the city on foot to discover historical monuments, cultural sites and unique places.

A traveler surnamed Chen from Anhui Province said, „City walks help me deeply experience the local culture. It's really a good choice.

Home-grown brands have also been successful among Chinese consumers. In the first two months of 2024, sales of horse face skirt and neo-Chinese jewelry increased by 6.3 times and 1.7 times.

The rise of the new „Made in China” is the start of a revolution, fueled by a younger generation with a growing love for the country, analysts said.

Besides, the sports economy has grown with increasing public health awareness. Sales of running shoes, quick-dry clothing and other outdoor sports equipment are increasing in tier-one and tier-two cities.

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„The change in consumption pattern should not be mistaken for 'reduction in consumption,'” said Xu Guangjian, vice president of the China Price Association.

Prolonged regression

Continued urbanization and rising income levels are the main drivers of China's protracted consumption slowdown.

By the end of 2023, about 66.2 percent of China's total population lived in cities, lower than the average of 80 percent in developed countries.

It is estimated that every one percentage point increase in the rate of urbanization translates into an additional 200 billion yuan in consumption demand.

Currently, there are still 170 million migrant rural workers and their family members who are yet to obtain permanent residency in cities.

Studies suggest that if they are granted urban residency and enjoy the same basic public services as urban residents, their consumption levels are expected to rise by 30 percent in real terms.

China's resident income growth has basically kept pace with the country's economic growth, and the income gap between urban and rural residents has narrowed.

China's per capita disposable income was 11,539 yuan (about 1,624.57 US dollars) in the first quarter of 2024, up 6.2 percent year-on-year, official data showed.

Urban per capita income rose 5.3 percent to 15,150 yuan, while that of rural residents rose 7.6 percent to 6,596 yuan.

China's job market has shown overall improvement, driven by a steadily recovering economy and pro-employment policies.

„Our sense is that there is a small but growing sentiment among white-collar workers that market conditions are improving, and this is leading to a greater willingness to spend,” said Ben Cavender, managing director of Shanghai-based China Market Research Group.

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He said some companies are thinking about how to grow their business again in China after years of holding back on investment, which is helping to improve sentiment.

„Residential income is rising and employment opportunities are improving, which is conducive to improving people's consumption ability,” said Sheng Layun, vice president of the National Bureau of Statistics.

Policy incentive

China has pledged to expand domestic demand and promote sound economic flows while promoting steady growth in consumer spending this year.

Last month, the Council of State released an action plan that included detailed measures to improve equipment upgrades and a program designed to improve trade in consumer goods.

The government will provide tax incentives and interest rate subsidies to companies engaged in equipment upgrades, and will provide subsidies to purchase high-emission passenger cars with energy-efficient vehicles or new energy vehicles.

For used household appliances, the country will provide financial assistance to establish recycling systems for renewable resources. Local governments and home appliance companies are encouraged to offer subsidies or preferential policies to consumers who buy or trade in green and smart home appliances.

„This market space is huge, and this project will not only boost consumption and investment but also promote energy security and high-quality development,” said Zhao Shenxin, vice chairman of the National Development and Reform Commission.

According to Sheng Layun, the country's consumption potential is still huge, with a market of more than 1.4 billion people and a constantly improving consumption pattern.

„I expect China's consumer market to continue to improve, and that consumption will continue to play the role of 'a ballast stone' for sustainable economic growth,” Sheng said.

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