Commerce Minister declares China a consumption-driven economy

China has successfully made the transformation to an economy driven by domestic demand, especially consumption, declared Gao Hucheng, Minister of Commerce, at a recent press conference. In 2015, China's retail sales of consumer goods totalled ¥30.1tn, up 10.7% YoY, and consumption contributed 66.4% to national economic growth. Gao noted that while medium- and high-income communities are forming in China, the challenge for businesses now is to supply goods and services that cater to their particular consumption needs, including safer and higher-quality commodities and more comfortable shopping environments. Focus for 2016 will be on continued efforts to develop cross-border electronic commerce.

China has successfully made the transformation from an economy whose growth is mainly driven by investment and foreign trade to one that is powered by domestic demand, especially consumption, said Gao Hucheng, minister of commerce, during a press conference held by the State Council Information Office on Tuesday.

By 2015, China's retail sales of consumer goods reached RMB 30.1 trillion, up 10.7 percent from the previous year. Consumption contributed 66.4 percent to national economic growth, 15.4 percent higher than in 2014, playing the role of stabilizer for economic growth.

Gao said there are many reasons for the increasing buying sprees by Chinese tourists overseas. Firstly, ever since the 18th National Congress of the Communist Party of China, the income growth of China's urban and rural residents has been faster than the GDP for three consecutive years and consumption capacity has also been expanding.

Secondly, China's social security system has been gradually improving, encouraging people with extra money to up their consumption.

Thirdly, consumption conditions have improved. The supply side has adapted to the market in recent years. For example, health care, travel and entertainment have seen growth.

As far as China's outbound shopping is concerned, data shows that there were 120 million oversea visits in 2015, and consumption abroad, including travel fees, accommodation and shopping expenses, totaled 1.5 trillion yuan ($229.8 billion), among which at least 700-800 billion yuan ($107.3-122.6 billion) was spent on shopping.

Medium- and high-income communities are forming in China, Gao notes, and medium- and low-end commodities and services can hardly meet their consumption needs. Their shopping lists have largely turned toward higher quality goods and better prices from past demands for luxury brands.

Therefore, business is now a focal point for playing the role of supply side, Gao adds. That is, how to meet the personalized and differentiated consumption needs of medium- and high-income communities, such as their need for safer commodities with better quality in more comfortable shopping environments.

Stores in China might be able to provide 200,000 or 300,000 varieties, but well-known supermarkets in developed countries provide more than 700,000 varieties. Price is another focus, especially given the tax burden and high logistics costs that are distinct to China. Logistic costs in China have gone down slightly due to years of effort, but they are still double those in developed countries.

"We will exert great efforts to develop cross-border electronic commerce and enable people to shop overseas without leaving home. This is one area we will focus on in 2016," Gao Hucheng says.