Quality consumption will be main buttress of 'dual circulation'

Customers enjoy the meals at a hot pot restaurant in Chongqing, on Oct 5, 2020. [Photo/Xinhua] 

The second aspect is consumption service upgrade, which can be realized through individualized and more specified services. It is also important to encourage consumption that is green and environmentally friendly. The third aspect is that it is important to promote cross-border e-commerce.

China's retail sales of merchandise accounted for a large part of total retail sales of social consumer goods. In 2019, China's retail sales of goods reached 36.49 trillion yuan, accounting for 89.3 percent of total retail sales of social consumer goods the same year.

Before the COVID-19 pandemic, China's disposable per capita consumption was 30,733 yuan last year, and actual per capita consumption was 21,599 yuan. It is worthwhile to mention that consumption among village residents is on the rise. The consumption propensity rate of rural residents in 2019 was as high as 83.19 percent. Consumption of merchandise accounted for a large part of that. During the pandemic, many orders were made online and completed through deliveries. China's retail sales of merchandise might see steady development this year.

Service consumption including dining, alcohol and beverages, coffee and home services will likely see rapid development. China is a large market for global alcohol consumption.

The third key factor relates to characteristics of China's consumption and changes in the consumption structure.

The consumption boom during the extended National Day holiday has confirmed three main characteristics of China's consumption:

One, innovation and upgrade mark the consumption structure. In the past, some of the most popular consumer products included firewood, rice, oil, salt, sauce, vinegar and tea. Now, consumers spend more on electronic products, cosmetics, and elderly care.

In 2019, sales of communication equipment and cosmetics increased by 8.5 percent and 12.6 percent respectively year-on-year, which was significantly higher than the overall growth rate of consumption.

Two, the growth of service consumption is higher than that of goods consumption. In recent years, the consumption of housing, medical care, culture, education and entertainment has grown much faster than that of food and clothing, and its share in total consumption has risen sharply.

The share of consumption of daily necessities and durable goods has declined. The consumption of communications and transportation has increased. Service consumption has become the main driving force for consumption growth.

Three, the growth rate of consumption in rural areas exceeds that in coastal cities. The current consumption levels in rural areas and in urban cities are constantly converging. It is particularly noteworthy that mobile payment and online shopping have made rural residents' consumption much easier than before.

The growth of consumption in rural areas is surpassing that of urban cities. The rural consumer market is being activated, and rural consumer demand is surging.

People's consumption philosophy and consumption structure have also changed accordingly.

Chinese consumers are starting to switch from following the trend of consumption to asking for more personalized products and services. In the past, many consumers used to ape fashions in other countries and tended to buy products that were cheap. But now, they prefer individualized and high-end products and services, which provides great opportunity for the manufacturing industry.

They are also shifting emphasis from quantity to quality. The past experience of developed countries shows that after entering the tier of high-income countries, people pay more and more attention to the quality of life, and their pursuits shift from quantity consumption to quality consumption.

The focus of China's consumption is switching from merchandise to services. At present, China's per capita GDP is about $10,000. Correspondingly, Chinese people have shifted from consumption for daily necessities to consumption for enjoyment.

It is clear there was a consumption boom during the extended National Day holiday but there were also challenges that hindered sustainable development of China's consumption sector.

Overly crowded scenic spots and the low quality of service are concerns. To increase the total number of holidays to stimulate consumption, China needs to step up research and analysis of the consumption preferences of different income groups. Efforts are also needed to cultivate new consumption hot spots.

In addition, although China has become the world's second-largest consumer market, the share of consumption in rural areas is relatively small. More efforts are needed to boost consumption in rural areas, especially in sectors of supply chain and service chain.

Measures to improve the efficiency of logistics and reduce logistics costs, as well as bolster a fair and orderly environment for consumption are necessary.

Overall, the consumption spike witnessed during the October holiday appears to be the starting point of a long-term uptrend. The boom may well extend till the year-end and even through the 14th Five-Year Plan period (2021-25) as consumption is tipped to be the driving force of China's economic development.

The writer is the vice-chairman of the China Center for International Economic Exchanges, a Beijing-based think tank.

The views don't necessarily reflect those of Qiushi Journal.