China stimulates domestic demand to strengthen economic upturn

This photo shows the recording site of the 9th episode of the China Economic Roundtable. [Xinhua/Li He]

* As China navigates a complex global economic landscape, it seeks to stimulate domestic demand to tackle both immediate and long-term challenges.

* Thanks to the government's supportive measures, signs of improvement in domestic demand are beginning to emerge.

* China's significant potential to boost consumption and investment, combined with the gradual impact of pro-growth measures, is expected to drive economic growth forward.

BEIJING -- As China navigates a complex global economic landscape, it seeks to stimulate domestic demand to tackle both immediate and long-term challenges.

China's policy for invigorating consumer spending and investment has produced results, according to guest speakers who joined the ninth episode of the China Economic Roundtable hosted by Xinhua News Agency, which was broadcast on Monday.

GATHERING STEAM

China has stepped up efforts, combining immediate policy measures with structural reforms, to stimulate domestic demand.

Thanks to these measures, including promoting equipment upgrades and consumer goods trade-ins, stabilizing the property market, and addressing local government debt risks, signs of improvement in domestic demand are beginning to emerge.

Retail sales of consumer goods, a main gauge of consumption, rose 4.8 percent year on year in October, quickening from the 3.2 percent increase in September, according to the National Bureau of Statistics (NBS).

Driven by the trade-in program, which offers consumers subsidies on the replacement of a wide range of products, household appliances and audio-visual equipment reported a 39.2 percent surge in combined sales in October compared to a year earlier.

Consumers learn about relevant policies during a consumer goods trade-in event in Qingdao City, east China's Shandong Province, May 17, 2024. [Xinhua/Li Ziheng]

Growth of the country's fixed-asset investment had remained stable for two consecutive months, posting an annual increase of 3.4 percent in the Jan-Oct period.

Backed by stable economic recovery and a revitalized tourism industry, the country's railway network handled a record of over 4 billion passenger trips in the first 11 months of the year, surpassing the 3.86 billion trips recorded for the entire year of 2023.

Zhao Chengfeng, an official of the National Development and Reform Commission, said the country has allocated about 6 trillion yuan (about 834.84 billion U.S. dollars) in government investment funds so far this year. These funds have supported the implementation of major national strategies and the building up of security capacity in key areas, facilitated post-disaster recovery and reconstruction, strengthened disaster prevention and relief efforts, and backed projects to improve livelihoods, boost employment and spur consumption.

"These projects are expected to play an important role in driving this year's economic growth and fulfilling the full-year economic and social development targets," Zhao said.

China's GDP grew 4.8 percent year on year in the first three quarters of 2024. The country set a target for economic growth of around 5 percent for this year.

GROWING PAIN

The lack of effective demand in China stems from both cyclical and structural factors, which analysts view as challenges emerging from the development process.

"It's a growing pain that China must go through during the process of its economic structure transformation and upgrading, and the transition from old to new growth drivers," said Chen Lifen, a researcher at the Development Research Center of China's State Council, a government think tank.

Chen said the adjustments in China's property market led to a reduction in investment demand, while increasing uncertainties in the world's economic development dampened external demand, eroding the momentum of domestic demand growth.

China's property market saw 1.8 billion square meters of commercial residential housing sold in 2021, but the figure fell to 1.12 billion square meters in 2023, according to the NBS data. 

This photo taken on April 28, 2023 shows people taking photos of a urban renewal project in Jiulongpo District in southwest China's Chongqing. [Xinhua/Huang Wei]

According to Nobel laureate economist Michael Spence, China has reached the stage of development where domestic, not external, demand should account for the bulk of aggregate demand.

"The transition from an export- and investment-led growth model to one based on domestic consumption and innovation amounts to a fundamental structural transformation," he wrote in a signed article recently.

Yet there is much room for optimism. The economist noted that "the challenges China faces are daunting, but not insurmountable. With a clear and well-targeted policy approach, growth momentum can be restored within two to three years."

"We should maintain confidence in China's economic growth," Chen added, noting that as the domestic demand-boosting policies take effect, they are set to bolster market confidence, encourage business investment, and strengthen the momentum of economic expansion.

SOURCE OF GROWTH

Domestic consumption is "the reliable source of growth" for China's economy, the International Monetary Fund (IMF) Managing Director Kristalina Georgieva said at a press conference in response to a question from Xinhua.

"Taking the sectors of the economy that are somewhat less developed from a consumer standpoint, like healthcare, education, elderly care, making services more of a driver for growth, that would help," she added. "I'm sure the leadership in China is looking into these choices."

The IMF has warned that the global economy is in danger of "getting stuck on a low-growth high-debt path," urging policymakers to act on debt and carry out pro-growth reforms.

Placing China in a global context is helpful. According to McKinsey's ConsumerWise survey of consumers, Chinese consumers are among the most confident in the world. The latest August round of survey results showed 59 percent of Chinese consumers said the economy would rebound within the next two to three months, compared with just 41 percent of American consumers, 30 percent of British consumers, and 13 percent of Japanese consumers.

Speaking about China's consumption growth prospect, Yang Nie, an official of the Ministry of Commerce, expressed a highly optimistic outlook. He noted that the country has a vast market of more than 1.4 billion people, 190 million business entities, a complete industrial system and various consumption scenarios that are thriving.

Tourists visit Jiefangbei, a business area in southwest China's Chongqing, Aug. 21, 2024. [Xinhua/Wang Quanchao]

Yang said that as Chinese people's living standards have continued to rise, consumers now focus more on services, consumption experience, as well as green and low-carbon products, generating new demand and opportunities for consumption.

As the country strives to promote technological innovation and industrial upgrading, and to improve infrastructure and public services to realize people's aspirations for a better life, there is significant potential to boost investment growth, Zhao said.

He highlighted several sectors that require increased investment, including green energy, new infrastructure, water conservation projects, emerging industries, future-oriented sectors, and areas related to people's livelihoods.  

The views don't necessarily reflect those of Qiushi Journal.