Consumers buy local-flavored mooncakes at a supermarket in Zhangye, Gansu Province. Photo: XINHUA

---

 

The argument that China’s consumption is degrading is unreasonable, because it fails to account for the total retail sales of social consumer goods and the features that define consumption tendencies.

China’s retail sales of social consumer goods have sustained a double-digit growth for over a decade. In the first three quarters of the year, the index has increased by 9.3 percent, a rapid growth rate regardless of it being 1.1 percentage points lower than at the same period last year. It should be noted that retail sales of social consumer goods indicates scale of consumption, but it doesn’t reflect the changes of consumption structure. The conclusion is that this decrease is the result of not considering all the necessary measurements. In fact, the slowed scale of expansion coupled with structural optimization proves that China’s consumption has moved up to a higher level.

Furthermore, the thriving cultural and services consumption is also not included in the retail sales of social consumer goods. In the first half of 2018, the country’s per capita expenses on physical fitness activities and hotel accommodation increased by 39.3 percent and 37.8 percent respectively. Per capita consumption expenditure, an indicator covering more consumption categories, has risen 6.3 percent, 0.4 percentage points higher than the rate at the same period last year. When all these indexes are considered, we find that China has not only expanded the scale of consumption, but also upgraded its structure. In addition, the slowed growth rate of the retail sales of social consumer goods can be attributed to several factors such as the reduction in the commercial housing sales area and the shifts in automobile purchasing policies. These short-term consumption fluctuations in some fields do not indicate a long-term tendency.

Emphasizing cost performance while promoting the consumption upgrade is part of the current shift in consumption structure. At present, the country’s Engel’s coefficient has dropped from about 60 percent in the early stage of reform and opening up to less than 30 percent now. Moreover, China’s economy is striving to integrate with the world, and its consumption has followed suit. The expanding cross-border e-commerce in recent years has enabled people to purchase goods from all over the world without leaving their homes.

Consumer activities will change as there are more choices for customers to choose from. People tend to spend more on high-end consumption such as social contact, leisure, health and education. They are likely to buy more affordable products and services when it comes to what to eat, wear and use. The expenditure reduction in low cost-performance products and activities is not consumption degradation. Rather, it’s the other way around. It is a testament to optimized consumption structure and more mature consumer attitudes.

From a supply perspective, a fully developed consumer market is highly segmented in terms of category, quality and price. Companies can choose their proper positioning and provide goods or services targeting different consumers. For example, grocery shops in communities and social network-based group buying are promoting a similar goal of satisfying diverse consumer demands.

Of course, we should admit the law that consumption is constrained by income. China has introduced a series of policies to increase residents’ income and stimulate consumption. Thus, the middle-income group can be expanded and more consumer potential released.

 

This article was translated from People’s Daily.

(edited by MA YUHONG)