The Chinese central government has launched new measures to boost consumption as escalating trade tensions with the US threaten to undermine economic growth.
The State Council recently launched the “Several Opinions on Improving Mechanisms to Encourage Consumption and Further Spurring Household Consumption Potential” (关于完善促进消费体制机制 进一步激发居民消费潜力的若干意见).
Dong Chao (董超), head of the Circulation and Consumption Research Institute at the Ministry of Finance, said to state-owned media that consumption has already emerged as a key pillar of the Chinese economy.
“In 2017 the contribution rate of end consumption to economic growth was 58.8%, and in the first half of this year the rate rose to 78.5%, for an increase of 14.2 percentage points compared to the same period last year, emerging as the main driver of economic growth.”
Dong points out, however, that compared to developed countries at stages of their history when per capita incomes were on par, China’s consumption rate is still considerably lower.
Service consumption as a share of household consumption expenditures in China also continues to lag far behind developed countries, where it’s generally above the 60% threshold.
Official data indicates that services consumption in China accounted for a 35.4% share of household consumption expenditures in 2017.
“Consumption has become a main driver of China’s economic growth, but the consumption policy system still finds it difficult to support upgrades and improvements in household consumption capability, ” said Dong.