Making practical policy changes to tap consumption potential

China's retail sales of consumer goods rose 4.9 percent year-on-year in October, and 0.5 percentage points from the previous month, according to the National Bureau of Statistics. The rebound for two consecutive months is enough to reflect the country's consumption resilience.

Given that consumption is an important driver of economic growth, China needs to better leverage consumption in its bid to promote the "dual circulation" development paradigm. Generally speaking, consumption is relatively stable, but large fluctuations are hampering consumption growth. Filling up such consumption growth gaps thus becomes an important policy direction.

The outbreak of the COVID-19 pandemic had a major impact on China's consumption in 2020, with the total retail sales of consumer goods and per capita consumption expenditure declining. As China took the lead in controlling the epidemic, its consumption has begun to gradually recover, with per capita consumption spending reaching 17,275 yuan ($2,700) in the first three quarters of 2021, compared with 15,464 yuan in the first three quarters of 2019 and 14,923 yuan in the first three quarters of 2020.

Although China's consumption is recovering, the recovery speed is still slower than expected. That is to say, there is still a growth gap between the actual consumption growth rate and the potential consumption growth rate.

For example, in the first three quarters of 2021, China's total retail sales of consumer goods grew by an average of 3.9 percent over the past two years. However, that growth rate was much lower than the pre-epidemic level of 8-9 percent. In addition, that consumption growth rate was slower than the economic growth rate, which averaged 5.2 percent in the first three quarters of 2021; and per capita disposable income growth of 7.1 percent over the past two years.

Therefore, while consumption is recovering, China needs to plug its growth gap. Making practical policy changes could help the country with a 1.4 billion population to tap its huge consumption potential. China should also boost epidemic prevention and control measures, given the epidemic's impact on services consumption.

While boosting the traditional consumption potential, China should also encourage the development of digital consumption and other new forms of consumption to promote healthy growth.

ECONOMIC DAILY