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Consumption still key engine to drive economy: Premier Li

Updated: Nov 11,2017 7:20 AM

As consumers’ final demand, consumption is crucial for China’s economy to grow and remain stable, and is the main engine for optimizing economic structure. Hence, we should do more to boost consumption, said Premier Li Keqiang at a symposium Nov 7.

He made the remarks when discussing economic work with economists and entrepreneurs at the event. Attendees shared their views, and some of the speeches centered on “consumption”.

Consumption has seen an increased contribution rate to China’s gross domestic product in recent years, and the ratio reached 64.5 percent in the first three quarters of this year, according to data quoted by Ha Jiming, a senior researcher at China Finance 40 Forum, a think tank in China, and former senior executive with Goldman Sachs Group Inc.

Ha said consumption has provided a strong boost to China’s economic growth, suggesting the country take more effective transfer payment measures and increase incomes for people in regions with higher marginal consumption, thus releasing more effective consumption potential.

The Premier agreed by saying that some experts had made similar suggestions, such as how the consumption speed in western regions is faster than in eastern regions, and more reasonable measures are needed to uncover potential in the west. “You could make further research in this field,” he added.

Yu Bin, member of the Leading Party Members’ Group of the Development Research Center of the State Council, said the surplus subtracting per capita consumption expenditure from per capita incomes of urban residents was increasing in the first nine months, revealing year-on-year growth of 12.2 percent.

“The surplus showed the increase in people’s income, and we will make further study on how to activate the surplus and how to form new consumption preferences, which will bring more growth engines to the Chinese economy,” said the Premier.

After experts and entrepreneurs voiced their opinions, Premier Li said China’s economy performed better than expected this year, which is a strong response to the “hard landing” scenario suggested by some foreigners recently.

“One of the fundamental factors for a well-performing economy is consumption, which can help cultivate the kind of healthy and positive growth and restructuring that we have anticipated for a long time,” he said.

“There used to be a viewpoint that China’s economy could suffer a ‘hard-landing’ if the growth rate of investment fell below 10 percent. But now, even though the rate has fell to 7 percent, it is still developing in a stable and healthy way,” he said. “It is because consumption is growing steadily, which stimulates production and supply.”

Some experts said residents’ consumption in China is moving toward a more customized, high-end and service-oriented scenario, so potential is huge in some industries such as healthcare, education, sports and tourism. As a response, the Premier said the supply-side structural reform should be furthered, with improving the quality of supply as a priority.

“We should be prepared for any crisis and maintain continuous, healthy economic development while tackling challenges,” Premier Li added.

He acknowledged that instability and uncertainty still exist in the external environment, structural contradictions in the domestic economy are still prominent, and other risks should not be ignored.

“However, we have a vast domestic market and the consumption potential is incomparable in the world. That’s why we have confidence in China’s economy,” he said.