{"id":7521,"date":"2021-04-21T06:00:38","date_gmt":"2021-04-21T06:00:38","guid":{"rendered":"https:\/\/focus.cbbc.org\/?p=7521"},"modified":"2021-05-05T05:41:03","modified_gmt":"2021-05-05T05:41:03","slug":"how-china-plans-to-increase-domestic-consumption","status":"publish","type":"post","link":"https:\/\/focus.cbbc.org\/how-china-plans-to-increase-domestic-consumption\/","title":{"rendered":"How China plans to increase domestic consumption"},"content":{"rendered":"

China plans to increase domestic consumption by at least 6% in 2021, but the large rural income gap, low education levels and rising household debt pose significant challenges, writes Torsten Weller.\u00a0<\/span><\/h2>\n

Increasing domestic consumption has become one of Beijing\u2019s major concerns. The 14th Five-Year-Plan, which was adopted in March, sets out an aim for Chinese disposable income to grow at least as fast as GDP . With this year\u2019s economic growth target set at 6% , this means that household spending should rise by at least the same amount.<\/span><\/p>\n

\"launchpad<\/a><\/p>\n

Domestic consumption is also a key component of the government\u2019s new Dual Circulation Strategy<\/a>, through which it plans to turn the country\u2019s vast consumer market into an irresistible magnet for foreign investment and businesses.<\/span><\/p>\n

Yet achieving this goal will require significant reforms. The Covid-19 pandemic has laid bare the weakness of China\u2019s domestic retail sector. Not only was it harder hit by the harsh lockdown measures, but it also took much longer to recover. Whereas industrial production was back to normal in April, retail sales only reached pre-year levels in August 2020 \u2013 five months after the end of the national lockdown. In the end, retail sales in 2020 remained 4.8% lower than in 2019.<\/span><\/p>\n

\"China<\/p>\n

Even before the Covid-19 outbreak, China\u2019s efforts to turn domestic consumption into the country\u2019s main growth driver were stalling. At the beginning of the 2010s, total retail sales accounted for 36.9% of China\u2019s GDP. The share increased in the first half of the decade, reaching 42.3% in 2016. Since then, however, retail sales have lost ground, dropping back to 2012 levels last year.<\/span><\/p>\n

To reverse this trend, the Chinese government needs to tackle three deep-rooted problems: the rural-urban divide, low education levels, and rising household debt.<\/span><\/p>\n