Service consumption a key driver of Chinese demand

Editor's note: Zhang Deyong is a research fellow at the National Academy of Economic Strategy, CASS. The article reflects the author's opinion and not necessarily the views of CGTN.

Consumption is the primary engine driving China's economic growth. Specifically, as people's aspirations for a better life continue to rise, service consumption has come to play an increasingly vital role as the primary engine that stimulates and expands consumption demand. It is becoming a crucial source of momentum for unlocking household consumption potential and expanding domestic demand in all dimensions.

According to the latest data, China's service retail sales grew by 5.2 percent year on year in the first three quarters of this year, 0.1 percentage points higher than in the January–August period and 0.6 percentage points higher than the retail sales of goods during the same period. Among them, retail sales in culture, sports, and entertainment services, communications and information services, tourism consulting and rental services, and transportation services all recorded double-digit growth. This shows that, compared with tangible goods consumption, intangible service consumption has emerged as an indispensable force driving the steady expansion of China's consumer market. Its robust growth momentum is expected to generate a "multiplier effect," spurring both the qualitative and quantitative upgrading of household consumption.

As China shifts toward a stage of high-quality development, greater emphasis is being placed on the role of consumption in fueling economic growth. Efforts to boost consumption have thus become a cornerstone of sustained and stable economic expansion. With improving living standards, residents' consumption preferences are becoming increasingly diverse, personalized, and quality-oriented. The household consumption structure is evolving from one dominated by goods to a more balanced mix of goods and services and is rapidly shifting from subsistence consumption toward consumption for development and even enjoyment. This transformation presents a favorable opportunity to accelerate the growth of service consumption.

In recent years, service consumption has become a key focus in China's efforts to foster new drivers and growth poles of consumption. Traditional service sectors, such as catering and accommodation, household management services, elderly care, and childcare, have continued to expand. Meanwhile, demand for services that aimed at enhancing people's lives, such as culture and entertainment, sports, and tourism is thriving, while emerging forms of service consumption represented by digital, health, and environmentally friendly consumption are proliferating. Whether through scale expansion or business-model innovation, these trends are injecting fresh vitality and dynamism into the upgrading and expansion of household consumption while clarifying the direction for multi-pronged efforts to vigorously boost consumption.

Since the beginning of this year, under the combined effect of various pro-consumption policies and measures, China has steadily unleashed consumer demand and witnessed stable growth in the consumption market. Yet, consumption potential still needs to be further unlocked, and the role of consumption as the "primary engine" remains to be fully leveraged. To this end, more effective measures are needed to enhance residents' consumption capacity, boost consumers' willingness to spend, drive consumption upgrading, and improve the overall consumption environment. This requires expanding the effective supply of services and meeting diversified, personalized, and quality-focused consumption demands to continuously advance the high-quality development of service consumption.

On the demand side, the top priority is to continuously boost household income levels, particularly for low- and middle-income groups. For example, stabilizing and expanding employment, increasing household income through multiple channels, and helping lower-income groups to earn more to reduce their burden. Only higher incomes can provide residents with sufficient purchasing power to enjoy service consumption, thereby laying a solid foundation for enhancing their consumption capacity and willingness. On the supply side, it is essential to effectively play the role of supply in creating demand, expanding the provision of premium services and leveraging high-quality supply to generate effective demand. For instance, measures such as easing market access, reducing restrictions, and optimizing regulation as well as innovating high-quality supply and enriching consumption scenarios. Meanwhile, efforts should be made to expedite the development of new types of service consumption in emerging areas such as digital, green, and smart services. A favorable consumption environment can better meet people's ever-growing demand for services.