In recent years, domestic consumption in China has been continuously sluggish. Last week, the Chinese government released its first five-year plan focused on promoting consumption. According to analysis by Bloomberg, the plan has missed the mark on addressing weak consumption, with some measures pointing in the opposite direction.
The Chinese government issued its first five-year plan with a focus on promoting consumption last week. The goal is to reach a total retail sales of consumer goods of 60 trillion yuan by 2030. The plan includes 28 measures related to lifestyle services, silver economy and caregiving, culture, tourism, sports, promoting car consumption across the entire value chain, and “artificial intelligence + consumption,” among others.
Bloomberg published an analysis on July 21 titled “China Misses the Mark on Consumption Issues,” bluntly stating that many details of the Chinese government’s plan to promote consumption point in the opposite direction. It is challenging to significantly increase the proportion of consumption to GDP from the current 40%, whereas in the United States, this figure is around 70%.
The article pointed out that the five-year plan to promote consumption did not propose measures aimed at increasing income and consumption capacity, such as addressing housing crises, investing in social services, tackling regional economic development disparities, or improving job prospects for recent graduates. Instead, the focus was placed on slightly enhancing the shopping experience, such as emphasizing improving food safety and the quality of tourism accommodations.
While the nationwide “trade-in old for new” program implemented by the Chinese government provided subsidies for the purchase of automobiles, home appliances, and electronic products, the plan largely aimed to support leading companies in the high-tech industry rather than directing more funds directly into the pockets of the public.
The article argues that China’s export of chips, computer parts, and electronic devices drove the country’s trade growth in the first half of this year, but the authorities lack the impetus to implement significant reforms that could effectively boost household consumption. Failing to take more measures to stimulate consumption now would mean missing a crucial opportunity.
Economists Larry Hu and Yuxiao Zhang from Macquarie believe that Beijing will continue to offer support only to achieve its growth targets while avoiding the reforms needed to address deeper structural issues. This makes the consumption promotion plan more of a statement of priorities rather than a genuine blueprint.
American economist David Huang expressed in a recent interview with Epoch Times that in Western societies, healthcare, education, retirement, and other services are largely public services with minimal individual financial burden. However, in China, the massive expenditures on essentials such as healthcare, education, and retirement lead to severe limitations on discretionary funds for the Chinese population, making it difficult to increase consumption for daily improvements amidst a significant economic downturn. Surviving the current economic challenges is the top concern for the Chinese people.
Huang emphasized that unless labor protections, income for residents, and the social safety net see substantial synchronized improvements, the grand plans for “expanding domestic demand” spoken by the authorities will struggle to materialize.
Political observer Xia Yan, in an article titled “China’s First Five-Year Plan to Promote Consumption: Still Treading the Old Path?” noted that setting “promoting consumption” as a comprehensive central-level plan for the next five years is a first in history. However, from 1998 until now, China has been advocating for expanding domestic demand for 28 years. Each crisis brings policy changes from the Chinese government, but the underlying logic remains the same. The five-year plan to promote consumption still carries a strong sense of a familiar pattern. When it comes to stimulating consumption, specific measures in the plan quickly turn towards revamping commercial streets, logistics hubs, cold-chain bases, parking lots, charging facilities, tourist areas, 5G networks, computing power networks, and various infrastructure construction projects.
The article pointed out that China’s top-down policy implementation system is well-versed in boosting the economy through investment. It is difficult to showcase achievements by enhancing social security for the public, but investments in logistics hubs can have tangible and calculable results. Ultimately, China may find itself walking the old path again, sparking a new wave of infrastructure investment frenzy across provinces and cities in a bid to promote consumption.