Consumption gains steam, drives growth

China's domestic consumption market is poised to continue its growth momentum in the second half of the year, fueled by continuous implementation of stimulus policies and residents' rising demand for high-end consumer goods, industry experts said.

Consumption's key role as a driver of economic growth has long been a key focus of China's top leadership. In the Government Work Report delivered in March, boosting consumption was listed as a top priority among this year's major tasks.

Consumer spending has played an increasingly pivotal role in China's economy. During a meeting of the Central Commission for Financial and Economic Affairs in February last year that was presided over by President Xi Jinping, he stressed that efforts should be made to encourage and guide a new round of large-scale equipment upgrading and consumer goods trade-in.

Last year, final consumption contributed 44.5 percent to China's economic growth, surpassing investment and exports, and it drove GDP up by 2.2 percentage points, according to the National Bureau of Statistics.

Cai Jiming, a professor at Tsinghua University's Institute of Economics, said: "Consumption is the fundamental driving force of economic growth.

"Improving consumption capacity, optimizing the consumption environment and promoting consumption upgrading can help drive the coordinated development of production and circulation, forming a virtuous cycle of economic growth. The shift toward a consumption-driven economic growth model has become inevitable."

To support this pivotal transition, stronger supportive measures have been introduced, including the issuing of ultra-long-term special treasury bonds worth 300 billion yuan ($41.8 billion) to back the consumer goods trade-in program, doubling the scale from last year. In October, the fourth and final group of fund, amounting to 69 billion yuan, will be allocated as planned, said the National Development and Reform Commission, China's top economic regulator.

The trade-in program has led to sales exceeding 1.6 trillion yuan in the first six months, driving strong growth in the retail sales of cars, home appliances and electronic products, the NDRC said.

Over the same period, total retail sales, a gauge of consumption, reached 24.5 trillion yuan, up 5 percent year-on-year. Specifically, the retail sales of goods reached 21.8 trillion yuan, growing 5.1 percent year-on-year, said the NBS.

"Facing downward pressure in the global economy and profound uncertainties this year, China's economy showed its resilience. The country's population of 1.4 billion constitutes a super large-scale market, which serves as a key driving force for China's economic growth and provides good business opportunities for global companies," said Fu Yifu, a special researcher at Su Merchants Bank based in Nanjing, Jiangsu province.

"The consumption market is expected to continue its growth trend in the second half. To further boost consumer demand, it's also crucial to lift consumer confidence by raising incomes and creating more jobs," Fu said.

On July 30, in a meeting of the Political Bureau of the Communist Party of China Central Committee that was chaired by Xi, the need to effectively unleash potential in domestic demand, encourage goods consumption and foster new growth drivers of service consumption was reiterated.

Fu added that for new growth points of service consumption, elderly care is expected to be a sunrise sector, fueled by an increasingly aging society.

In addition, long-range medical treatment, high-end physical examinations, housekeeping services, the cultural tourism sector and advancements in technological innovation such as artificial intelligence are set to open up new market frontiers.

The Ministry of Commerce, together with five other departments, launched the "Shopping in China" campaign in April, and various events and promotions have been held across the country, attracting domestic and international consumers and generating fresh sales growth.

China unveiled a set of measures in April to further optimize its departure tax refund policy for eligible overseas visitors. In the first six months, sales revenue driven by tax refund shopping jumped 94.6 percent year-on-year, according to the State Taxation Administration.

At domestic drone manufacturer DJI's store in Beijing's Guomao area, sales were further boosted after it introduced the tax refund policy last year, and the store's order conversion rate was lifted to around 80 percent, from the previous 20 to 30 percent.

Guo Shaogang, store manager of DJI in Guomao, said: "Foreign visitors are used to getting tax refunds when they travel abroad. Many travelers coming from countries such as the United States, Russia, Germany and Saudi Arabia are interested in buying drones and handheld products."

A traveler from the Netherlands who wanted to be identified only as Marco recently shopped in the Guomao area and received an instant tax refund for the products he bought. He said that being able to buy tax-free goods is always good, just like in many other countries.

Macloud Kadam'manja, an official from Malawi who went to Changsha, the capital of Central China's Hunan province, earlier this summer, said he enjoyed shopping for Chinese products at a local market.

"I came to this shop because the prices of most items are reasonable, and I will get some tax refunds, so this is the place that I would buy things each time I come to Changsha," Kadam'manja said.

Andrea Yue, partner of indirect tax services at professional services provider EY, said that implementation of the instant tax refund policy has become an accelerator to help stimulate spending.

"Foreign visitors' trend of shopping in China is further heating up, thanks to the country's continuous optimization of the business environment and consumption experiences, and the supply of more high-quality products," Yue said.

With more such policy fine-tuning and the upcoming peak time for travel as well as festival-incentivized spending, China's domestic consumption is expected to contribute more to the nation's overall economic growth this year, observers said.

zhuwenqian@chinadaily.com.cn