Consumer spending key to nation's economic growth, experts say

With efforts to upgrade China's economy continuing steadily, consumption－the purchase of goods and services by households－now accounts for more than half the nation's GDP, and its share is increasing.

Last year, consumer spending contributed 65.4 percent of GDP, making it the biggest driver of China's economic growth, but with the evolving COVID-19 epidemic, efforts to boost consumption are being challenged by weakening demand and sluggish growth.

Researchers said that a new guideline, released by the National Development and Reform Commission, which focuses on holiday purchasing potential, also considers consumption growth a key economic driver in the long run. As economic development faces hurdles this year, strong consumption, if realized, will effectively underpin steady growth, they said.

Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation, said that one key takeaway from the guideline is that expectations of consumer spending generating more growth this year are emerging.

"While many measures mentioned in the guideline focus on consumer spending during Spring Festival, they will also hopefully have a long-term effect throughout the year, so that spending grows into an effective measure underpinning growth," he said. "Meanwhile, we must also be aware that the effectiveness of these measures won't be achieved overnight. Their positive impact will gradually emerge as the year progresses."

The guideline also aims to diversify consumption on the supply side, Zhou said. He noted that viewed from a broader perspective, over the past year, the central government has unleashed policies to support enterprises. Measures that cut taxes and fees, and lower rents and concessional lending rates, have given businesses momentum, and provided them space to innovate and diversify.

"These favorable measures can also benefit employees and increase their incomes, which could generate stronger consumer spending," he said, adding that looking back on 2021, consumption growth was relatively stable.

While this has helped experts form reasonable expectations for consumer spending this year, Zhou acknowledged that their predictions depend on higher incomes and overall momentum in economic growth.

"In addition, more effective, well-targeted containment measures to fight COVID-19 will also increase spending confidence," he said.