Surging household consumption gives new impetus to China’s economic growth

By Wang Jiamei Source:Global Times Published: 2017/10/16 21:38:40

While analysts generally expect a decline in China's GDP growth in the coming months, the country's central bank governor has said that the economy will probably expand 7 percent in the second half of this year.

"Economic growth has rebounded this year, with GDP growth reaching 6.9 percent in the first half, and it may achieve 7 percent in the second half," Zhou Xiaochuan, governor of the People's Bank of China (PBC), was quoted as saying Sunday at the G30 International Banking Seminar in Washington, according to Reuters.

Zhou mentioned that the driving force behind China's economic growth mainly comes from the rapid expansion of household consumption. In the first eight months of 2017, retail sales rose 10.4 percent year-on-year. With the consumption focus gradually shifting from traditional goods to services, the value-added of the tertiary industry now accounts for 55 percent of GDP, up from about 40 percent 15 years ago.

The country is undergoing a consumption upgrade, with rapid growth in sectors like education, tourism, culture and entertainment, and healthcare. For instance, during the eight-day National Day and Mid-Autumn Festival holidays, China's box office revenue surged 41.9 percent year-on-year. Also, 705 million domestic tourist trips were made, generating 583.6 billion yuan ($88.04 billion) in revenue, up 11.9 percent and 13.9 percent, respectively.

Higher household incomes and socioeconomic shifts help explain why consumption has the potential to become a new engine to drive the Chinese economy. According to data from the China Institute for Income Distribution, the middle-income proportion in China rose from less than 5 percent in 2000 to about 32 percent in 2016. Assuming that trends in income distribution remain unchanged in the next few years, the middle-income proportion is expected to reach 43 percent in 2020, exceed 50 percent in 2025, and hit 60 percent in 2030.

Meanwhile, as a result of the new second-child policy, the number of newborns in China surged to 18.46 million in 2016, a 17-year high, with further increases expected. Newborns boost consumption in such sectors as clothing, food, housing, transportation, entertainment and healthcare.

Some people say that the impact of housing purchase curbs may weigh down China's economic growth in the second half. But despite market cooling in some first- and second-tier cities, third- and fourth-tier cities have still recorded booming performances.  In the first eight months of 2017, commercial housing sales jumped 17.2 percent year-on-year, with the sales area up 12.7 percent. A bullish property market will continue to support the consumption of construction materials, furniture, household appliances and other goods.

The author is a reporter with the Global Times.


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