The Chinese government has vowed to make consumption the “main driver” of the economy amid mounting hopes that Beijing’s abandonment of the zero-Covid policy will trigger a spate of spending from Chinese consumers and fuel a global recovery.
“The greatest potential of China’s economy lies in the consumption of its 1.4 billion people,” said Li Keqiang, China’s premier, during a meeting of China’s cabinet, the State Council, according to a statement released late Saturday.
“Increasing consumption is an important step in expanding domestic demand. We need to restore the structural role of consumption in the economy.”
While China has long sought to boost consumer spending, the comments from its outgoing premier come at a crucial time as Beijing seeks to rebuild the economy after years of punishing lockdowns.
China’s economy grew just 3 percent in 2022, underscoring the impact of the government’s zero-Covid strategy before it was abandoned last month. The collapse of the housing market last year, which has contributed about a quarter of GDP over the past decade, has also increased economic stress.
Economists hope China’s pent-up consumption will boost global demand.
Multinationals like Unilever have said in recent weeks that they expect demand in the country to pick up, and banks like Morgan Stanley have upgraded their growth forecasts for China. “We believe the market is underestimating the broader implications of reopening and the possibility that a robust cyclical recovery can materialize despite persistent structural headwinds,” the bank said in a January statement.
However, doubts remain about Chinese consumers’ willingness to spend again.
Experts have long warned that China’s desire to move from property-led growth to more consumer spending will pose a challenge. Household spending accounted for 38 percent of China’s gross domestic product in 2021. In comparison, they accounted for almost 70 percent of US GDP in 2022. The last few years of Covid have also prompted economic caution as incomes and house prices came under pressure in the housing crash.
The country’s already high gross national savings rate swelled during the pandemic. According to data from the People’s Bank of China, renminbi deposits held by households nationwide grew by a record Rmb17.8 trillion (US$2.6 trillion) in 2022, compared with growth of Rmb9.9 trillion in 2021.
Chinese citizens last week celebrated the Lunar New Year for the first time since pandemic controls were lifted. While state media say 226 million domestic trips have been made, up 74 per cent from last year at the height of Covid restrictions, that’s still only half of the 420 million trips made in 2019.
Comments are closed.