China’s consumer spending accelerated in May, constituting a major force to stabilize the economy, even as industrial output and investment growth weakened, the National Bureau of Statistics said on June 14.
Economists said consumer spending is expected to remain at high levels in the second half and authorities should prioritize job stabilization, which greatly affects demand and the overall economy.
Retail sales increased by 8.6 percent year-on-year in May, up from 7.2 percent in April, according to the NBS.
Industrial output expanded by 5 percent year-on-year in May, down from 5.4 percent in April. Fixed-asset investment rose by 5.6 percent in the first five months, compared with 6.1 percent in the January-April period. Growth of real estate development investment eased to 9.2 percent in May, down from 12.1 percent in April.
Retail sales picked up significantly in May, thanks to the longer May Day holiday in 2019, greater online sales and a recovery in auto sales, NBS spokesman Fu Linghui said. Vehicle sales rose by 2.1 percent year-on-year in May, compared with a 2.1 percent fall in April, he said.
“China’s economic growth has undergone profound changes in the post-crisis era,” he said. “The ratio of consumer spending to GDP has been on the rise for eight consecutive years.”
In the second half, consumer spending is forecast to continue at “healthy levels”, with retail sales growth helping to bolster stable economic growth, said Tang Yao, an associate professor of economics from Peking University’s Guanghua School of Management.
“The Chinese people have great consumption potential, especially in education and travel,” he said. “The country’s tax reduction will provide incentives for people, especially the middle-aged group, to increase spending in education and travel during major holidays.”
China reduced taxes and fees by 1.3 trillion yuan ($187.8 billion) in 2018 and plans to cut taxes and fees by 2 trillion yuan in 2019.
“I don’t think it is necessary to further cut taxes and fees” beyond those already planned, Tang said, “but the government is closely monitoring the situation. If the economy sours, it could make further moves in that respect”.
Given external uncertainties posed by slowing world economic growth and trade frictions as well as continued domestic deleveraging, the Chinese economy is facing downside risks, economists at China International Capital Corp said in a research note.
Tang said, “I think China will achieve its economic growth and employment targets. The top policy priority should be stabilization of jobs. It will help anchor consumption.”