Consumption reviving economy, but time to consolidate results

The Central Economic Work Conference convened in mid-December said that China should give priority to the recovery of consumption, strive to enhance consumption capacity, improve consumption conditions, and create more consumption scenarios.

Fully tapping the potential of the domestic market and strengthening the role of consumption should be an important task for the authorities.

Since the 18th National Congress of the Communist Party of China in 2012, China has built a consumption-led domestic demand development pattern, which has strengthened the internal driving force for innovation-driven development.

China is the largest developing country with a vast domestic market. In 2012, the country's total retail sales of consumer goods amounted to 20.6 trillion yuan ($2.99 trillion), but that had more than doubled to 44.1 trillion yuan in 2021, with an average annual growth rate of nearly 9 percent, making it the second-largest consumer market in the world after the United States. In 2021, consumption accounted for 56.0 percent of domestic demand, 3.4 percentage points higher than in 2012. From 2012 to 2021, the country's per capita consumption expenditure rose from 12,054 yuan to 24,100 yuan, with an average annual nominal growth of 8.0 percent.

The Engel Coefficient of Chinese residents has dropped by 3.2 percentage points, and the gap with the developed countries has gradually narrowed. As consumption plays a bigger role than investment in economic growth, China's economic growth has gradually achieved a from-investment-to-consumption-driven transformation.

While seeing an ever-increasing level of consumption, the quality of China's consumption has also upgraded significantly. In 2021, China's per capita consumption expenditure on services was 10,645 yuan, 44.2 percent of its total per capita consumption expenditure, 4.5 percentage points higher than in 2013.

As new technologies represented by the internet, big data, cloud computing and artificial intelligence play an increasing role, China's consumption has accelerated. The emergence of innovative consumption products in the fields of mobile intelligent terminals, intelligent robots, smart homes and intelligent transportation, and new consumption models such as virtual reality, augmented reality and interactive consumption have also offered consumers more consumption scenarios.

While recognizing the role of consumption in supporting economic growth, the country still needs to make greater efforts to consolidate the achieved results in boosting consumption, better coordinate supply-side structural reform and support the expansion of domestic demand through multiple channels in order to support the economy.