Consumption to put economic growth on fast rebound

Consumption growth will support a rapid economic rebound in China next year, economists said.

"Thanks to the arrival of COVID-19 vaccines, the overall economic situation of China will return to normal next year, with consumption catching up in strength," said Liu Ligang, managing director and chief China economist at Citigroup.

Liu forecast that the country's retail sales of consumer goods will increase by 16.5 percent year-on-year in 2021, compared with a 4.1 percent contraction this year.

"Consumption will contribute about 6 percentage points of China's GDP growth, which will reach 8.2 percent next year, according to our estimation," he said.

The government is still launching policies to boost the consumption of automobiles and home appliances, as well as the consumption in other industries. Furthermore, if China accelerates the implementation of reforms of the household registration system to allow more migrant workers to have urban household status, the government will encourage these people to make greater contribution to the local economy in terms of consumption, he said.

Qu Hongbin, chief China economist at HSBC, also noted that reforms of the household registration system will be helpful to relieve migrant workers from their concerns about housing, healthcare and child education, thus lowering their motivation in saving money and increasing their willingness to spend.

"Our estimates show that if China allows migrant workers to enjoy the same social welfare as urban residents, this reform alone will speed up China's GDP growth by 0.6 percentage point every year and largely increase migrant workers' spending while the other conditions remain unchanged. But it will take time," Qu said.

Manufacturing investment is also expected to recover in the next few years due to several factors. For example, the rebound of industrial profits since the third quarter of this year will lay a solid foundation for a rise in the production capacity in the next quarter. The increase of industrial profits indicates that China may need to increase manufacturing investment as its export demand continues to grow, he said.

HSBC expects that China's GDP will rise by 8.5 percent from the previous year in 2021.