As economists lower their 2015 growth forecasts for China, some have also hastened to point out the silver lining.
Retail sales, which is representative of society’s consumer spending, is steadily expanding its importance relative to net exports and investment in fixed assets, such as the construction of new homes and factories.
Sheng Laiyun, an economist at the National Bureau of Statistics, said recently that in the first eight months of the year, retail sales registered 10.5 percent growth year-on-year, compared with 10.9 percent growth in fixed-asset investment and a 1.4 percent drop in exports.
This was based on the fact that 60 percent of China’s GDP growth in the first half of 2015 came from consumption, compared with 35.7 percent from fixed-asset investment and only 4.3 percent by exports. In 2014, consumption’s contribution was 54.3 percent.
The difference, Shen explained, means the economy is already showing signs of structural change.
Now that the driving force from both fixed-asset investment and exports is weak, the question is whether retail can keep up its growth and secure its position as China’s future growth leader.
Having consumption play a bigger role in the economy is seen by both the government and economists as necessary for China’s transition from an investment-and export-led growth model to a more sustainable model based primarily on the power of domestic consumers.
In the short run, economists say, retail is likely to see further increases thanks to the public holidays in the coming months such as the Mid-Autumn Festival on Sept 27 and National Day in October.
China International Capital Corp gave the most optimistic forecast so far among the financial institutions, saying retail sales growth in the third quarter is likely to accelerate to 10.9 percent, and then hit 11.8 percent in the last three months.
Japanese securities company Nomura predicted retail sales growth of 10.5 percent in the third quarter and 10.7 percent in the fourth.
Apart from overseas tourist services, the strongest growth will come from sales of food, catering and sports and entertainment products, according to a research note from Dongxing Securities.
Wang Tao, chief economist in China at UBS AG, said retail growth in the second half will also be supported by continued increases in consumers’ incomes and in the government’s fiscal and social welfare spending, such as on pensions and healthcare.
Wang predicted a long growth curve in consumption’s contribution to China’s GDP, which is likely to rise another 3 to 4 percentage points by 2020－especially on demand for community-level services for an aging population.
However, some economists are candid about the problems facing further growth in consumer spending in China. Chang Jian, chief economist in China at Barclays Capital, said the recent stock market turmoil and the yuan’s depreciation against the US dollar may have hurt consumer confidence in the country.