China’s month-long consumption campaign aims to ‘unleash spending potential’ of Chinese people
- Upcoming promotional period in May will involve millions of retailers, but analysts say significant hurdles remain to get people to spend again
- Boosting domestic consumption is an economic priority in China’s five-year plan to 2025, as well as its long-term vision through 2035
China is gearing up for a month-long campaign to “accelerate the recovery of consumption and unleash the spending potential” of its people, as the country has effectively brought the pandemic under control but is still struggling to boost consumer spending so that it is the driving force behind the nation’s economic recovery.
The national consumption festival, hosted by the Ministry of Commerce (Mofcom), will kick off on Saturday in Shanghai with a variety of events such as online sales and auto exhibitions, as well as discounts and vouchers across the country.
“Household spending is now restricted to a certain degree, while the recovery is unbalanced with some sectors, businesses, products and regions progressing slowly,” ministry spokesman Gao Feng said at a press conference on Sunday.
The move came as the Chinese leadership is increasingly looking inward to tap the potential of its huge domestic market to fuel economic growth, particularly amid external uncertainties.
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But despite the central government’s enthusiasm, there are worries that consumer confidence is not yet strong enough in post-coronavirus China.
First-quarter national retail sales, including purchases of consumer goods and also catering revenue, reached 10.5 trillion yuan (US$1.62 trillion) – a 33.9 per cent increase against the low comparison base from the same period last year, and an 8.5 per cent increase from the first quarter of 2019. The recovery gained further momentum in March as sales rose 34.2 per cent from a year earlier and were 12.9 per cent higher than in March 2019.
China started to hold these types of consumption festivals a decade ago, in line with its efforts to shift away from an investment-driven growth model. Previously, such events were often organised by provincial or municipal governments at different times throughout the year.
But Mofcom decided to make the campaign more prominent this year following the lockdown measures and strict social-distancing rules that dragged consumption down during the pandemic.
“We encourage all local authorities, departments and industries to do their best and provide tailor-made discounts at these events,” said Zhu Xiaoliang, head of Mofcom’s Department of Consumption Promotion.
“I don’t think there will be ‘retaliatory consumption’” this year to make up for weak spending early last year at the height of the pandemic, Zhu Ning, a finance professor at Shanghai Jiao Tong University, told Chinese media last week. “Such demand was already unleashed in the second half of last year.”
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Consumption now plays a bigger role in the post-pandemic recovery as the manufacturing sector is cooling amid higher prices for raw materials.
China International Capital Corp, a leading investment bank, on Sunday lowered its national GDP growth forecast for 2021 to 8.5 per cent from 9 per cent, and cut its estimated social retail sales growth for the year to 14.8 per cent from 15.3 per cent.
“Revenue and wealth divergence dampen the pace of consumption recovery, while service consumption recovers slowly due to the pandemic,” wrote its analysts, Zhang Wenlang and Huang Wenjing.