Economic Daily:
We notice the total retail sales of consumer goods increased by 9.3 percent during the January-September period, lower than the growth rate of 10.4 percent during the same period last year. It can be said that there is an obvious slowdown in consumption growth. Recently, there are also a lot of public discussion on whether China is witnessing a consumption downgrading. Mr. Mao, how would you comment on this? Thank you.
Mao Shengyong:
When talking about changes in consumption on a month to month basis, we usually use the total retail sales of consumer goods to measure the market consumption situation. Fluctuations in the growth rate of this indicator in the last few months have caused some public discussion.
We can analyze consumption changes from multiple perspectives as we gather more quarterly statistics. For instance, when looking at overall volume, the total retail sales of consumer goods increased by 9.3 percent in the January-September period, with the volume in September being 0.2 percentage points higher than August. A growth rate above nine percent can be considered as relatively fast.
In terms of per capita consumption expenditure of Chinese households, the nominal growth reached 8.5 percent in the first three quarters, up one percentage point year-on-year.
When seeking to understand consumption in a holistic and comprehensive manner via an accounting perspective, it should be pointed out that final consumption expenditure's contribution to economic growth reached 78 percent in the first three quarters, up 14 percentage points year-on-year.
Taking these indicators into consideration, we can see that consumption has maintained relatively fast growth and its contribution to overall economic growth keeps increasing. This momentum trend has not changed.
Now, let's look at the statistics via several different structures. The first is the Engel Coefficient, which shows the proportion of food expenditure in total household spending. In 2017, China's Engel Coefficient dropped to 29.3 percent, below the usual benchmark of 30 percent for the first time. It was 28.5 percent in the first three quarters of this year, down a further 0.7 percentage points year-on-year.
In terms of the consumption of services, this accounted for 48.2 percent of Chinese residents' total consumption in 2017, up 5.2 percentage points compared to 2012. It means that the proportion of service consumption in the total increased by an average of 1.04 percentage points annually over the past five years. In the third quarter of this year, its proportion reached 52.6 percent, up 0.2 percentage points year-on-year.
In terms of physical goods consumption, sales of some products taken to indicate consumption upgrading, such as cosmetic products and smart home appliances, have maintained relatively fast growth. Auto sales overall did slow down; however, the percentage of SUV sales in the total keeps increasing.
In terms of the urban and rural structure, in the first three quarters, the nominal growth of rural residents' consumption increased by 12 percent, much higher than that in the urban areas. Rural residents' spending on education, culture and entertainment is growing at a relatively fast pace.
As a result of studying such factors, we can see that the public consumption structure has maintained a rapid trend of upgrading.
To sum up, the trend continues as China's consumption maintains relatively fast growth, the consumption market is expanding, the contribution of consumption to economic growth continues to increase and consumption structure is constantly upgrading. In the next period, consumption will play an increasingly important fundamental role in promoting China's economic growth as China enters different stages of development and transforms its economic development mode. However, we should attach importance to various factors that constrain consumption growth. On the one hand, we should take various measures and work harder to increase incomes, improve income distribution and the social security system, and thus raise residents' consumption capacities. On the other hand, we need to deepen the supply-side structural reform and improve the quality of supply, so as to continuously satisfy the needs of consumption upgrading.
