Opinion / Op-Ed Contributors

Time for policy to focus more on consumption

By ZHU QIWEN (China Daily) Updated: 2016-05-12 08:20

Time for policy to focus more on consumption

Tourists select cosmetics at Sanya Haitang Bay International Shopping Mall.[Photo by Huang Yiming / China Daily]

The country's sputtering export machine has obviously caught the full attention of Chinese policymakers who rolled out supportive measures on Monday.

However, similar government efforts to help domestic consumers, which would be more cost-efficient and effective in sustaining China's overall economic growth, are still in short supply.

For the world's second-largest economy to steadily press ahead with its transformation from expansion led by exports and investment toward growth driven by consumption and services, it is necessary for the Chinese authorities to entice consumers to spend more.

The General Administration of Customs said on Sunday that China's export growth plunged from 18.7 percent in March to only 4.1 percent in April. Such a weaker-than-expected export figure has undoubtedly dampened the hopes raised by a slew of upbeat economic data in March. It also made it urgent for the Chinese government to do all it can to bolster sluggish export growth.

To cope with the global market uncertainties that have disrupted the country's trade performance so far this year, the State Council, or the Cabinet, released a guideline document on Monday that set out supportive measures such as optimizing tax refund policies for certain exports, enhancing export credit insurance and offering more financial support to Chinese manufacturers.

Given the contribution that China's rising status as a leading global trade power had made to the country's double-digit growth during the past few decades, it is understandable that Chinese policymakers are seeking to reignite this seasoned growth engine. But the focus on exports has time and again led Chinese policymakers to postpone making a comprehensive stimulus package for consumers as a top priority.

But it is neither possible nor desirable to build the already-huge export engine into the key driving force again. There needs to be less dependence on Chinese manufacturers' unremitting efforts to export at any cost.

Both the 10-trillion-dollar-plus size of the Chinese economy and the huge share of global trade that Chinese exporters have put a limit on the role that export growth will play in boosting China's overall economic growth in coming years.

Instead, the country's ongoing economic transition toward more sustainable consumption and services-driven growth means the country is relying more and more on domestic consumers who have enjoyed far less policy support than Chinese exporters over the past three decades.

Consumption has already made a bigger contribution than investment and exports to overall economic growth in the first quarter of this year, while services expanded 7.6 percent and now account for 56.9 percent of the country's GDP.

It is not that Chinese policymakers never provide any government support for consumption growth. Government subsidies for energy-saving household appliances and new energy cars are clear examples of a helping hand that please both Chinese consumers and producers.

But the scale and scope of such policy support has never gained as much sense of urgency as the policy support aimed at beefing up exports and investment.

The stable growth of domestic consumption, long eclipsed by breathtaking investment and the boom in exports, only began to shine when these two growth engines recently began to lose steam.

However, the country's status quo consumption policy can neither meet the rising demands of Chinese families for better products and services nor reflect the potential for consumption to grow into a much bigger driver of economic growth as it is in many other countries of similar or higher income levels.

Urgent policy support to boost investment or export growth may help avoid an unexpected hard landing. Yet, it is only a substantial boost to domestic consumption that will guarantee moderate but sustained economic growth for years to come.

The author is a senior writer with China Daily.

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