Foster new growth drivers in services spending

At present, China's economic development is at a critical stage of transitioning from high-speed growth to high-quality development. As China's per capita GDP has surpassed $12,000, the structure of household consumption is undergoing a historic transformation — from one dominated by the consumption of tangible goods to a shift toward giving equal weight to both goods and services. Accelerating the cultivation of new growth drivers in services consumption is not only an urgent measure to expand domestic demand and stabilize current economic growth, but also a long-term strategy to promote industrial upgrading and meet people's growing needs for better-quality lives.

Why must services consumption be placed at the core?

Cultivating new growth drivers in services consumption is not the sole responsibility of a single department, but a strategic endeavor that involves the overall macroeconomic landscape.

First, as a new engine driving economic growth, services consumption is becoming a key variable in stabilizing growth. Compared with the slowing growth of traditional retail sales of goods, retail sales of services have demonstrated strong resilience. Unlike the purchase of durable goods, services consumption often has very strong industry spillover. Taking the sports event economy as an example, a popular soccer match or marathon not only generates ticket revenue, but also directly stimulates surrounding consumption in transportation, catering, accommodation, tourism and shopping, forming a "1+N" spillover effect. Such integrated consumption scenarios have a multiplier impact on GDP growth.

Second, as a key pathway for promoting economic structural upgrading, the high-quality development of services consumption serves as a driving force that pushes forward supply-side structural reform. The development of services consumption breaks down industry boundaries and promotes the integration of multiple sectors, including commerce, tourism, culture, sports and health. It has given rise to new business models such as "performing arts + tourism", "digital+ cultural tourism", and "health and wellness + real estate". This integration accelerates the extension of traditional service industries toward the high end of value chains and helps optimize overall economic structure. Whether it is the application of virtual reality or augmented reality, technologies in smart cultural tourism or artificial intelligence-assisted diagnosis in online healthcare — new forms of services consumption serve as a "training ground" for the application of new technologies. The upgrading of services consumption demand directly promotes the commercialization of frontier technologies such as AI, big data and cloud computing, injecting "new quality productive forces" into the economy.

Third, with the expansion of the middle-income group, consumption demand has shifted from "whether there is" to "whether it is good". At present, household demand for personalized, diversified and high-quality services — such as premium cultural tourism, health management, high-end eldercare, smart housekeeping and lifelong education — is experiencing explosive growth. Cultivating new growth drivers is, in essence, about resolving the contradiction between people's growing needs for better lives, and unbalanced and inadequate development. By providing high-quality services supply, it is possible to tangibly enhance the public's sense of fulfillment, happiness and security.

Despite broad prospects, the release of services consumption potential is still constrained by multiple factors, mainly concentrated in three areas — supply, institutions and the environment.

First, on the supply side, there are structural mismatches and a disconnect between quality and price. The market lacks landmark services brands with international competitiveness. In some areas, there are serious problems of "demand without supply" or "supply without quality". The Jiangsu city football league — Suchao — is in extremely high demand due to its high-quality viewing experience, reflecting the public's strong desire for high-level sports events. Popular museums such as the Palace Museum and the National Museum of China face long-standing difficulties in making reservations, highlighting bottlenecks in the supply of high-quality public cultural resources. The services sector is labor intensive, and is currently facing a severe labor shortage. Taking the eldercare sector as an example, frontline senior care workers in Hunan province can meet only about 22 percent of actual demand, and the workforce is generally older and lacks professional skills, constraining improvements in service quality.

Second, at the institutional and regulatory level, there are hidden barriers and oftentimes insufficient oversight. In key sectors such as healthcare, education and culture, relatively strict market access restrictions and implicit barriers remain, making it difficult for private and foreign capital to enter. This results in a single type of service provider and a lack of competitive vitality. Services consumption is often characterized by intangibility and non-storability, making traditional regulatory approaches difficult to adapt. In particular, problems such as companies that lure customers into prepaid purchases without delivering services, disorder in online livestreaming, and a lack of personal information security expose deficiencies in credit systems, quality standards and safety management mechanisms.

Third, in terms of environmental support, there are dual constraints related to purchasing power and convenience of experience. Affected by the macroeconomic environment, household income expectations are less than ideal at present. At the same time, households bear relatively heavy expenditure burdens in areas related to education, healthcare, eldercare and childcare, creating a clear crowding-out effect that suppresses the release of other services consumption.

To address the above challenges, systematic measures must be implemented from four dimensions: supply innovation, demand stimulation, institutional reform and environmental optimization.

First, high-quality supply should be used to lead and create new demand. Industry players must vigorously develop integrated business formats combining "commerce + tourism + culture + sports + health", as well as support key areas such as the debut economy (first stores and first launches), the ice and snow economy, the silver economy, the sports event economy and the concert economy, while building several consumption landmarks with immersive experiences. Upgrading the night-time economy is not merely about extending business hours, but about enhancing cultural depth and technological content to create 24-hour living circles. Using artificial intelligence technologies to create new scenarios such as smart tourism, smart homes (proactive services) and online fitness (real-time error correction) should be encouraged. Through big data analysis, precisely matching user needs and realizing personalized customization of service products is necessary, as is orderly expanding pilot programs in sectors such as telecommunications, healthcare and education, introducing world-class service institutions, management models and standards, and enhancing domestic service quality through the "catfish effect".

Second, on the demand side, the country must ensure that people both "have the ability to consume" and "are willing to consume", implement urban-rural income growth plans and expand the middle-income group. More importantly, the government should effectively reduce the burden on people's livelihoods. For example, the country should explore expanding the pilot scope of the long-term care insurance system to ease family eldercare pressures, and provide childcare subsidies and consumption vouchers for eldercare services to reduce the costs of childbirth and senior care. Further optimizing visa policies (such as transit visa-free arrangements), breaking down barriers between foreign card payments and mobile payments, expanding coverage of tax refund shops, providing multilingual services in key tourist attractions and commercial districts, as well as creating an international consumption environment that is welcoming to both domestic and overseas consumers are all necessary.

Third, at the institutional level, the government should remove systemic obstacles through deepening reform, with authorities advised to select about 50 cities nationwide with solid foundations to carry out pilot programs for new consumption forms, models and scenarios. Granting these cities greater autonomy to experiment first in areas such as approval processes, regulation and land use, and exploring experiences that can be replicated and promoted nationwide should be promoted.

Fourth, at the policy level, policymakers should adhere to a dual approach that combines real financial support with institutional safeguards; use central government budget investment to support the construction of service facilities in culture and tourism, elderly care and childcare; establish special financial instruments, such as a 500-billion-yuan ($72 billion) re-lending facilities for services consumption and eldercare; and increase credit supply and interest subsidies for micro, small and medium-sized enterprises in the services consumption sector to reduce financing costs.

In summary, the core of fostering new growth drivers in services consumption lies in "mutual promotion of supply and demand". On the one hand, higher-quality and more diversified services supply should be provided through technological empowerment and institutional innovation. On the other hand, household worries should be alleviated through income distribution reform and rights protection. This is not only an upgrade at the level of consumption, but also a profound transformation involving industry structure, social policy and governance capacity. Only by effectively deploying this "policy combination" can the enormous potential of services consumption be truly unleashed, enabling China's economy to move steadily and sustainably along the path of high-quality development.

The writer is a researcher at the National Academy of Development and Strategy at Renmin University of China.

The views do not necessarily reflect those of China Daily.