On the same day China’s political advisory body called for a national discussion to solve the domestic-demand conundrum, Premier Li Qiang also pushed for measures to spur spending
The Communist Party’s chief theoretician has urged groups outside the party – including China’s eight minor political parties, industry and commerce representatives, and public figures without party affiliation – to contribute to the discussion on how to boost domestic demand, as Beijing steps up efforts to entice the public to spend more.
Improving domestic demand is a strategic priority and a necessary step towards ensuring the long-term and healthy development of China’s economy, said Wang Huning, head of the Chinese People’s Political Consultative Conference and China’s No 4 official, at a meeting of the political advisory body on Wednesday that was specifically dedicated to boosting demand.
“Efforts should focus on key issues related to expanding domestic demand, delivering more in-depth, detailed and practical research outcomes, and ensuring that these findings are effectively translated into actionable results,” he said.
Wang also called for improvements in the quality of field research and the overall standard of policy proposals and political consultation, according to a statement published by party mouthpiece Xinhua after the meeting.
The fresh comments make Wang the latest high-ranking Chinese official to join the chorus championing the need to expand domestic demand, led by President Xi Jinping.
Wang’s remarks came just a couple of weeks before a meeting of China’s cabinet, the 24-member Politburo, scheduled for the end of the month, and with analysts expecting further demand-side stimulus policies as China struggles to lift domestic consumption.
On the same day, Premier Li Qiang chaired an executive meeting of the State Council to review the implementation of key policies aimed at strengthening domestic circulation. The meeting called for special initiatives to boost consumption and a “systematic cleanup” of unreasonable restrictions that limit household spending.
Retail sales, a gauge of consumption, rose in June by 4.8 per cent, year on year, according to data released by the National Bureau of Statistics on Tuesday. The pace marked a slowdown from 6.4 per cent in May and fell short of market expectations.
The effects of new austerity measures introduced in May for government officials were also reflected in the latest data. Growth in retail sales of catering services fell from 5.9 per cent in May, year on year, to 0.9 per cent in June, while tobacco and liquor sales growth crashed from 11.2 per cent in May to -0.7 per cent in June.
The 0.9 per cent growth for catering services was the lowest since the end of the zero-Covid policies at the end of 2022, according to a Nomura note on Tuesday.
“To effectively cope with the mounting challenges, we believe Beijing needs to take bolder actions to clean up the mess in the property sector, support consumption in a more sustainable way by reforming the pension system, fix the fiscal system to better protect business owners, and improve its relationships with other economies,” economists led by Lu Ting said in the note.
To boost domestic consumption over the long term, the Chinese government needs to introduce bolder reforms, rather than relying on stimulus measures, according to analysts such as Xu Tianchen, senior China economist at The Economist Intelligence Unit.
“Consumer subsidies can support domestic consumption in the short term,” Xu told the Post on Wednesday, “but in the long run, there need to be structural changes – including deregulation and fiscal reforms.”
