Service consumption: a new engine for China's economic growth

Editor's note: Liu Chunsheng is an associate professor at Central University of Finance and Economics and deputy dean of Blue Source Capital Research Institute. The article reflects the author's opinions and not necessarily the views of CGTN.

Against the backdrop of profound adjustments in the global economic landscape, the Chinese economy is at a crucial moment of transformation and upgrading. 

In the first half of 2024, the contribution of the service industry to national economic growth and the service industry's value added as a percentage of GDP both exceeded 50 percent, indicating that service consumption has become an important pillar of the Chinese economy and a major driver of consumption expansion.

According to data from the National Bureau of Statistics (NBS), in the first six months of 2024, total retail sales of consumer goods reached 23.6 trillion yuan ($3.3 trillion), a year-on-year increase of 3.7 percent, with retail sales of services increasing by 7.5 percent, outpacing that of goods by 4.3 percentage points. 

Service consumption has become a vital force for economic growth, with offline consumption and contact-based consumption rebounding quickly. The proportion of service-oriented consumption is on the rise, providing strong support for the overall economic recovery.

With the improvement in residents' income levels and shifts in consumption concepts, consumer demand for services is no longer limited to basic living services. Instead, it is increasingly focused on personalization, diversification, and quality.

Sales of upgraded goods are growing rapidly, with retail sales of communication equipment and sports and entertainment products of major enterprises increasing by 11.3 percent and 11.2 percent year on year, respectively. At the same time, strong sales of emerging consumer goods such as new energy vehicles and smart home appliances reflect consumers' pursuit of a high-quality life. 

In the service sector, the resurgence in industries such as catering, tourism, and cultural entertainment, has been strong. Notably, during the Dragon Boat Festival holiday, the number of domestic tourists and their total expenditure increased by 6.3 percent and 8.1 percent year on year, respectively, further demonstrating the immense potential of service consumption.

Technological innovation is a vital driving force for the high-quality development of service consumption. 

In recent years, with the deep integration of "Internet Plus," new business formats and models such as e-commerce, online education, telemedicine, and smart tourism, have emerged, providing consumers with more convenient, efficient, and personalized service experiences. 

According to NBS data, online retail sales grew by 9.8 percent year on year in the first half of 2024, while the retail sales of physical goods online rose by 8.8 percent. Furthermore, the popularization of high-tech products such as service robots and smart wearable devices has injected new vitality into the development of service consumption.

To promote the quality and efficiency enhancement of the service industry, it is essential to vigorously develop modern service industries, particularly knowledge-intensive and high-tech service sectors, and extend the service industry to the high end of the value chain. It is also crucial to strengthen service infrastructure construction, improve the coverage and accessibility of service supply, and meet the diverse and quality-oriented service needs of the populace. 

Consumption upgrade is key to driving the high-quality development of service consumption. Consumers should be guided to establish scientific, rational, green, and healthy consumption concepts. 

It is necessary to improve the consumption promotion framework, increase support for service consumption, and reduce consumer costs through various means, such as financial subsidies, tax incentives, and financial support. Moreover, consumer rights protection should be strengthened, with a sound mechanism for consumer rights protection established to enhance consumer satisfaction and trust.

Technological innovation is the crucial engine for driving innovative development in service consumption. We should enhance technological research and development and application promotion, fostering technological and business model innovation in the service consumption sector. 

On one hand, we must accelerate the application and promotion of advanced technologies such as artificial intelligence, big data, and cloud computing in the sector to improve the intelligence and personalization levels of service consumption. On the other hand, we should cultivate and develop new business formats and models for service consumption, such as the sharing economy and platform economy, to inject new momentum into the development of service consumption.

Currently, China's service supply still faces inadequacies and structural imbalances. In some areas, there is insufficient service supply to meet the diversified and quality-oriented needs of the public, while in other sectors, there is an oversupply of services, leading to resource waste and inefficiency.

Consumer confidence is also insufficient. Some consumers lack confidence in consumption and maintain a wait-and-see attitude toward service consumption. As the service consumption market continues to expand and competition intensifies, enterprises must continuously enhance their competitiveness and innovation capabilities to establish their positions in the market.

To promote the high-quality development of service consumption, the government should introduce more supportive policies, such as financial subsidies, tax incentives, and financial support, to reduce operational costs for enterprises and enhance consumers' willingness to engage in service consumption. Additionally, it is essential to deepen the supply-side structural reform of the service industry, optimize the service supply structure, and improve the quality and efficiency of service provision. Strengthening service infrastructure construction to enhance coverage and accessibility is also vital.

A sound consumer rights protection mechanism should be established, and the formulation and enforcement of laws and regulations for consumer rights protection should be strengthened. Businesses should be encouraged and supported to enhance technological and model innovation, increasing the intelligence and personalization of service consumption, while also strengthening brand building and market promotion to enhance the recognition and reputation of enterprises.