China's retail sales set to growth 15-20% in 2021
Another national stimulus is unlikely given powerful recovery
Published: Jan 19, 2021 07:48 PM

File photo:Xinhua

As China has just revealed encouraging economic figures for 2020, some Western media organizations are focusing attention on the country's sluggish growth in consumer spending and expressing doubt about whether the rebound will sustain.

Chinese experts said that domestic consumption would remain a key driver of China's economic growth, which is expected to soar by 15-20 percent year-on-year in 2021.

Retail sales dipped 3.9 percent year-on-year to 39.20 trillion yuan ($6.04 trillion) in 2020, with restaurants' revenue dropping 16.6 percent to only 3.95 trillion yuan. Consumption spending accounted for 54.3 percent of the country's GDP last year, according to the National Bureau of Statistics (NBS).

Pointing to the slack in retail sales, the Straits Times reported that the figure has "lagged expectations," while the Financial Times said that China's economic growth "looks less healthy" beyond exports.

Chinese economists refuted the claims, saying that the services sector in all economies was hit the hardest by the pandemic, especially as case resurgences affect consumers' expectations, and it will take more time to fully recover.

"In 2020, China rolled out effective measures, such as giving out vouchers, to spur domestic consumption. The steps have yielded some results, but the fundamental factor for reviving consumption is effectively getting the outbreak under control, and only then can consumer spending return to normal," Lian Ping, head of Zhixin Investment Research Institute, told the Global Times on Tuesday.

Scenarios that require people to gather together, such as catering and tourism, show the difficulty of a swift recovery in the short term, he said.

Gao Liankui, a research program director of China and World Economic Governance at Renmin University of China, told the Global Times on Tuesday that a tipping point may emerge in June 2021 when a "revenge rebound" in consumption is expected, if the pandemic across the world is put under effective control with large-scale vaccination efforts.

"China's consumption may grow 15-20 percent year-on-year this year," Gao said. He said that there is still plenty room for growth in domestic consumption, especially given that China's labor productivity has been greatly improved in recent years amid widening digitization drive. As a result, average incomes have risen faster.

Data from the NBS showed that the country's average disposable income posted a nominal rise of 4.7 percent year-on-year in 2020 to 32,189 yuan.

Meanwhile, data from the People's Bank of China, the country's central bank, showed that households' deposits increased 11.3 trillion yuan in 2020. Consumers are expected to spend their excess savings this year.

The central government probably won't roll out another fiscal stimulus plan to spur spending this year, Gao said, noting that "the economy has huge potential and what is needed is stable growth rather than stimulus."

In addition, the central government's mandate to cut tax rates and administrative fees to support the real economy over the past several years has resulted in dwindling revenues in the hands of some local governments. "This has limited their abilities to spark consumption in the regions," he said.

Yan Pengcheng, a senior official with the National Development and Reform Commission, said at a press conference on Tuesday that the authorities will free up "the fundamental role of consumption" in economic growth by focusing on improving the consumption power of residents, and optimizing the consumption environment.

Some administrative restrictions on consumption will be removed in an orderly way, and this will encourage large cities that impose strict automobile purchase quotas to expand the quota numbers, he said.

Yu Miaojie, deputy dean of the National School of Development at Peking University, told the Global Times that prudent and stable monetary policy will be continued this year to stabilize small and medium-sized enterprises, which have created more than 80 percent of the country's jobs. "Meanwhile, taxes and fees should be further reduced so as to further enhance residents' disposable income."