Chinese economy heads toward consumption-powered growth
Published: Nov 01, 2020 09:48 PM

Residents enjoy food at Guiyang, Southwest China's Guizhou Province on Friday.  China will work to improve the consumption of domestic residents and support the recovery and development of the consumer service sectors, according to a government work report submitted to the national legislature for deliberation on Friday. Photo:cnsphoto

The road ahead for China's economy would be a monumental transition toward domestic demand-driven growth, guided by the "dual circulation" new development pattern, economists said.

They called for greater fiscal commitments to social security and earnest efforts to unleash the buying power of the nation's rural population.

With the just-released 14th Five-Year Plan (2021-25) highlighting the "dual circulation" model of growth - the internal circulation, referring to domestic economic activities, will be taken as the mainstay and complemented by the external circulation - the domestic market is set to be the engine driving economic growth.

China joined the international circulation since the launch of reform and opening-up, marked by the nation's accession to the WTO, which has enabled the country to become "the world's factory". This plays an important role for the nation to seize the opportunity of economic globalization, rapidly lift economic strength, and improving Chinese people's livelihood, reads an article authored by Chinese President Xi Jinping published in the latest issue of the Qiushi Journal.

In recent years, economic globalization has encountered head-winds and the COVID-19 outbreak is likely to exacerbate anti-globalization waves, according to the article, noting that boosting domestic demand serves as a crucial response to the pandemic-inflicted impact as well as a strategy to maintain the economy's long-term sustainability.

Achieving internal circulation is the advantage of a major economy like China, the article says, which called the nation - with 1.4 billion people and per capita GDP of over $10,000 - the largest consumption market in the world. But boosting domestic demand is not in contradiction with pushing for greater openness, the article says.

In a research report sent to the Global Times, ICBC International economists Cheng Shi and Wang Yuzhe said that as the world's second-largest economy and the top manufacturer, China is an important hub for regional and global economic activities, and it will increasingly turn out to be a dual epicenter for global supply and demand.

The Chinese economy created 16.1 percent of global GDP in 2018, while its contribution to global final consumption only stood at 12.1 percent, suggesting enormous potential for increases in domestic consumption to be tapped. 

Still, there are hurdles to overcome to steer the economy into be-ing consumption-powered, Lian Ping, head of Zhixin Investment Research Institute, told the Global Times on Sunday.

The nation is still not on par with developed economies when it comes to fiscal support for low-income people, Lian said, urging more fiscal spending for social security to lay the groundwork for an economy relying on domestic consumption power.

As the Chinese economy leaves behind its dependence on manufacturing, investment and exports for growth, what has previously not been given enough importance, such as efforts to address income inequality, ought to be given higher priority, Lian said.

Lian stressed that the nation's 600 million rural residents and more than 200 million migrant workers mean vast purchasing power to be unlocked, if urbanization picks up speed.

To this end, bigger steps are to be taken on reforms to make rural land rights tradable, which - added to improved rural pension and healthcare benefits - will transform about half of China's population into potent consumption driving force, he said.