At present, China’s consumption growth is slowing down, and some officials from an official Chinese Communist Party think tank said the country’s economy will still need investment to support it and put more money into infrastructure construction. On Wednesday, China’s Ministry of Transportation announced plans to build 3,000 kilometers of new railroads and more than 30 new civilian airports in the next three years.
Bloomberg reported on March 29 that Xu Hongcai, deputy director of the Economic Policy Committee of the China Society for Policy Science, said the rise in consumption as a percentage of GDP is likely to slow compared with previous years, and that China’s economic growth is still expected to require investment to support it, with more money being invested in infrastructure construction.
The China Society for Policy Science is a think tank under the Policy Research Office of the Central Committee of the Communist Party of China.
According to Xu Hongcai, China’s consumer spending has passed the stage of rapid growth. The growth rate of consumer spending as a share of China’s nominal GDP has been slowing since about 2016, according to Bloomberg data.
On Feb. 17, a research report released by Teng Tai, director of the Wanbo Institute for New Economic Research, and Zhu Changzheng, a researcher at the Wanbo Institute, in the Journal of Finance and Economics, showed that China’s resident income will decrease by about 1.7 trillion yuan for the year 2020. Due to the severe slowdown in income growth and the decline in residents’ willingness to consume, the annual final consumption in 2020 shows the first decline since 1978.
According to the report, reducing reliance on investment and increasing consumer spending have become longer-term goals for Beijing.
The CCP’s 14th Five-Year Plan and the draft outline of the 2035 Vision have both proposed domestic market requirements for consumption and investment, and 12 departments, including the Ministry of Commerce, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the Ministry of Finance, and the Ministry of Ecology and Environment, have issued a notice on several measures to boost bulk consumption and promote the release of rural consumption potential. The Circular also issued a number of measures to boost consumption in the rural areas.
During the two sessions of the National People’s Congress, Chinese Communist Party delegates have also been talking about consumption and have come up with various ways to get people to spend more money.
According to survey data from the Family Finance Survey Center of Southwest University of Finance and Economics for the first half of 2020, the real growth rate of disposable income per capita in China slows to 2.1% in 2020. In absolute terms, disposable income per capita will be 32,189 yuan in 2020, and if compared with the average nominal growth rate of the previous two years, residents’ income as a whole increased by about 1.7 trillion yuan less last year.
The survey data shows that low-income households in China with annual incomes of less than 30,000 yuan and 30,000-50,000 yuan expect the largest reductions in consumption, with 26.4% of companies reporting reduced hiring and 15.5% reducing salaries, according to the family members surveyed.
Another statistic shows that the growth rate of disposable income of mainland residents has been in a continuous decline for many years, with 10.6% in 2012, falling to 7.4% in 2015 and 5.8% in 2019. 2020 saw a 3.9% decline in total retail sales of consumer goods and a 4% real decline in per capita consumer spending, a weak annual consumption situation that is the original trend of accelerating decline under external shocks.
In 2019, a survey conducted by a stratified linear random sample of 70,000 representative samples from the China Institute of Income Distribution at Beijing Normal University showed that 39.1% of China’s population has a monthly income of less than 1,000 yuan, which translates into a population of 547 million people, while the population with a monthly income of 1,000-1,090 yuan is 52.5 million, and the total population with a monthly income of less than 1,090 yuan is 600 million people, accounting for The proportion of the national population is 42.85%. Among these 600 million people, 5.46 million people have zero income, 220 million people have a monthly income below 500 yuan, 420 million people have a monthly income below 800 yuan, 550 million people have a monthly income below 1,000 yuan, and 600 million people have a monthly income below 1,090 yuan.
If we take 1090-2000 yuan as the standard for low and middle income earners, the population of this group reaches 364 million, which means that the number of people with monthly income below 2000 yuan in China reaches 964 million.
Yao Yang, a professor at Peking University and president of the National Development Institute, once pointed out in a public speech that Chinese people are poor and have no money to spend, so the government should give them money.
Nearly 1 billion people in China earn less than 2,000 yuan a month, making it difficult to support consumption. On Wednesday (March 24), the Ministry of Transport of the Communist Party of China said in a press conference that it plans to build 3,000 kilometers of new railroads and more than 30 new civil airports within three years.
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