Influenced by rising income and changing consumer attitudes, China’s booming consumption has kicked in as “a new driver of economic growth”, said an article in The Economist magazine on Sept 26.
The article said that pessimists over-emphasized the sluggish growth under the economic new normal, and overlooked the rapid expansion of consumption, which, as a target of government reform, is becoming increasingly important for the Chinese economy.
Statistically, recovery in the property sector has boosted demand for furniture, home electronics and renovation materials, with sales in August increasing an average of 17 percent from a year earlier, far higher than the economic growth rate of 7 percent in the first half of the year. Smartphone sales have declined in volume but soared by value, as more consumers move to the high-end market. Buying has rebounded in recent months, from jewelry to traditional Chinese medicine.
However, analysts said the retail growth in consumption might have been more colossal than what surveyed figures showed.
The retail numbers do not include services, a glaring omission since surveys show that services account for as much as two-fifths of China’s consumer spending, according to Nicholas Lardy, an expert on Chinese statistics at the Peterson Institute for International Economics.
The article said the main reason for the resilience of Chinese consumers is steady income growth. Wages for migrant workers rose by 10 percent in the second quarter compared with a year earlier, higher than the national average of 7 percent. The fact that low-income shoppers tend to spend more of their pay than the wealthy has given consumption an extra boost.
Concerns over job cuts and slowed income growth still linger, but services account for a bigger share of the economy than industry, employ more people and are still growing, according to the article.
A generational shift has also contributed to the consumption rise, as the younger generation start earning higher salaries and are willing to buy more, which is expected to lift the restraint that high household savings have posed on consumption.
In addition, the article said that zealous Chinese shoppers, in a way, have become an engine of the world economy.
Last year, the number of Chinese tourists going abroad rose by 19.5 percent to 107 million, which makes China the world’s biggest source of tourism dollars. In South Korea and Thailand, the increase in spending by Chinese tourists in 2011-14 made up for the fall in exports to China over the same period, according to Capital Economics, a research firm.