Quality consumption will be main buttress of 'dual circulation'

The COVID-19 pandemic has severely suppressed China's consumption this year. In the first half, the growth rate of consumption declined. Many people are concerned about whether consumption－it has been the driving force of China's economic growth in recent years－is still strong.

Three key factors distinguish China's consumption story today.

First, the consumer market during the extended National Day and Mid-Autumn Festival holiday in early October was vigorous in some regions and industries, after recovering in an orderly manner.

According to data from the Ministry of Commerce, sales of China's major retail and dining companies reached 1.6 trillion yuan ($238.77 billion) from Oct 1 to Oct 8. Their average daily sales increased by 4.9 percent compared with last year's National Day holiday.

According to data from the Ministry of Culture and Tourism, tourist attractions across China received 637 million visits, and tourism revenue nationwide reached 466.56 billion yuan, regaining 79 percent and 69.9 percent of that in the same period last year respectively.

The film industry was hit hard by the pandemic this year and the current cinema attendance rate is still stable at 75 percent. However, total box-office receipts of films released during the holiday reached the second highest among all National Day holidays in China's history.

According to the country's film ticketing and data authority, total box-office receipts of films screened from Oct 1 to Oct 7 reached about 3.70 billion yuan. The Chinese audiences appeared to have thought that the extended holiday period was good for family reunions complete with film viewings.

Consumers have shown massive enthusiasm for spending on goods and night fairs. Consumption in culture, tourism, physical training and catering sectors is recovering.

The consumption boom during the National Day holiday has also attracted attention from across the world. Carlos Abella Picazo, secretary-general of Spanish organization Mesa del Turismo, which represents the interests of all sectors of the Spanish tourism industry, said that the Spanish government should learn from China's experience, strive to contain the epidemic as soon as possible, and rejuvenate Spain's sluggish tourism industry.

The second key factor is that four consumption trends－new forms of consumption, upgraded consumption, consumption of material goods and service consumption－will lead the market rebound after the COVID-19 pandemic.

Owing to the impact of the epidemic, consumption in the first half of this year had been severely affected. However, China's consumption capacity and level have not changed.

China's consumption is only temporarily suppressed due to measures for the prevention and control of the pandemic. In the second half of the year, consumption started to see a rapid recovery and growth.

New forms of consumption include culture and healthcare, which will see greater development after the pandemic. During the holiday, libraries and museums were among the top choices for many citizens.

Meanwhile drama, film, music, dance and other activities launched by art groups from all over the world brought a high-level cultural feast to citizens. Films also attracted a large number of audiences during the holiday, after the industry was halted in the first half due to the pandemic.

A great lesson from the epidemic for Chinese citizens is that we should exercise to enhance our immune systems. There might be a boom in the industry of exercise and fitness after the epidemic. Tennis, volleyball, basketball, marathon, yoga… all those kinds of exercise activities might see a surge in the number of people practicing.

Meanwhile, healthcare for the elderly may also see a growing need, and that will drive the development of traditional Chinese medicine, and related industries like herbs, senior care, and Yangsheng (life nurturing).

COVID-19 has offered opportunities for the development of upgraded consumption. China's current consumption can be upgraded from three aspects: the first is our way of consumption, which can become more convenient through online and offline channels, mobile payments, big data, and cloud computing.

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 China Daily.