In the first quarter of this year, China’s consumption was a major contributor to economic growth, highlighting the nation’s gradual shift toward a domestic consumer-driven economy.
The first quarter (Q1) GDP growth in China was 5.3% year over year, with 73.7 percent of the growth in the economy coming from domestic consumption, according to figures released earlier this week by the National Bureau of Statistics.
Among the main highlights of the consuming sector were the surge in service consumption, particularly those associated to festivals, and the ongoing structural upgrading of household consumption.
NEW FORMS OF CONSUMPTION
New spending patterns have emerged quickly in China in a variety of industries, including entertainment, travel, and the internet sector.
For example, Chinese people’s favorite pastimes these days are city walks. The tours entail a comprehensive walking investigation of the city to find noteworthy locations, cultural hubs, and historical sites.
“I can fully immerse myself in the local culture through city walks. It’s a pretty wise decision, a visitor from Anhui Province going by the last name Chen said.
According to observers, the emergence of a new “Made in China” is only the beginning of a revolution driven by a younger generation’s rising affection for the nation.
In addition, the sports industry has prospered as public health awareness has grown. In first- and second-tier cities, sales of outdoor sports equipment, including running shoes and quick-dry clothing, are surging.
“It is incorrect to perceive the shift in consumption habits as a ‘downgrade in consumption,'” stated Xu Guangjian, the deputy chairman of the Price Association of China.
SUSTAINED RESILIENCE
The key factors sustaining China’s resilient consumption are the country’s ongoing urbanization and rising income levels.
China’s urban population share at the end of 2023 was roughly 66.2 percent, which was still less than the norm of about 80 percent in industrialized nations.
An extra 200 billion yuan of consumption demand is predicted to result from every percentage point increase in the urbanization rate.
Currently, 170 million migratory workers from rural areas and their families do not yet have permanent residence in cities.
Studies have indicated that their real consumption levels are projected to increase by thirty percent if they are granted urban residency and given access to the same basic public amenities as urban inhabitants.
The economic growth of China has mostly kept up with the growth in resident income, and the income divide between urban and rural people has shrunk.
According to official figures, China’s per capita disposable income increased by 6.2 percent annually to 11,539 yuan (or around 1,624.57 US dollars) in the first quarter of 2024.
The per capita disposable income in urban regions increased by 5.3% to 15,150 yuan, while in rural areas it increased by 7.6% to 6,596 yuan.
Because of the nation’s pro-employment policies and steadily improving economy, China’s job market has improved overall.
Ben Cavender, managing director of Shanghai-based China Market Research Group, stated, “We sense that there is a small but growing sentiment among white collar employees that the market situation is improving and this is also leading to greater willingness to spend.”
He claimed that several businesses were considering how to expand in China once more after years of delaying investments, which was contributing to the improvement in sentiment.
“People’s ability to consume goods is being enhanced by rising resident incomes and improving employment,” stated Sheng Laiyun, deputy chairman of the National Bureau of Statistics.
POLICY INCENTIVES
China has committed to supporting stable growth in consumer expenditure this year while simultaneously increasing domestic demand and sound economic flows.
The State Council released an action plan last month with specific steps to support a program aimed at increasing consumer goods trade-ins and equipment upgrades.
In addition to offering tax breaks and interest rate subsidies to businesses upgrading their equipment, the government will also subsidize individuals who trade in their high-emission passenger automobiles for new or energy-efficient models.
The nation will offer financial assistance for the establishment of recycling systems for discarded household equipment that employ renewable resources. It is recommended that local governments and home appliance manufacturers provide incentives such as subsidies or favorable policies to customers who buy or exchange for eco-friendly and intelligent household appliances.
Zhao Chenxin, deputy head of the National growth and Reform Commission, stated, “This market space is very huge, and the program will not only boost consumption and investment but also promote energy conservation and high-quality development.”
Sheng Laiyun claims that the nation still has enormous consumption potential due to its market of over 1.4 billion people and its constantly evolving consumption patterns.
“I expect China’s consumer market to continue to improve, and that consumption will continue to play the role of ‘a ballast stone’ for stable economic growth,” Sheng stated.
Shayne Heffernan
