By Qi Yunlan, DRC

2018-7-20

In the first half of 2018, the total retail sales of social consumer goods reached 180.018 trillion yuan, an increase of 9.4% year on year, and down by 1 percentage point compared with the same period of last year. The growth rate of consumption was lower than expected. The year-on-year growth in May 2018 stood at 8.5%, an increase of 6.8% in real terms, hitting an all time low in the past 15 years. The year-on-year growth in June registered at 9.0%, an increase of 7% after price factors were deducted. Final consumption contributed 78.5% to economic growth. The consumption market had seen both obvious slowing growth and largely improved contribution rate by final consumption to the economy, and the reasons are as follows.

In view of short-term factors, the adjustment of car-related policies is the major cause of the remarkable drop of consumption growth. The retail sales of cars account for about 12% in the total retail sales of social consumer goods. The consumption of cars is greatly influenced by relevant policies, and the change of which can exert great influence on consumption. The preferential policies relating to taxes of car purchase has been canceled since the beginning of this year, affecting people’s purchase of cars in some ways. The Tariff Committee of the State Council issued Announcement on Reducing Import Tariff of Cars and Parts on May 22 and began to reduce the tariff of imported cars and parts since July 1, causing some residents to delay their car purchase. The growth rate of retail sales of cars dropped by a large margin from 3.5% in April to minus 1% and further to minus 7% in June, reducing the total retail sales of social consumer goods. It is the major factor causing the drop of consumption growth in the first half of 2018.

As for mid-term factors, the slowing growth of rural and urban residents’ income is a key factor leading to the deceleration of consumption growth in the past six months. Income is a fundamentally influential factor of consumption viewing from mid-to-long term. Since the beginning of this year, the income growth rate of urban and rural residents has seen a downward trend. In the first half of 2018, the per capita disposable income of residents across the country was 14,063 yuan, a normal increase of 8.7% year on year. The actual growth rate was 6.6% in real terms, decreased by 0.7 percentage points compared with the same period of last year. Under such influences, the consumption of some traditional goods showed a slow growth. For instance, catering consumption has taken the lion’s share in the whole consumption market. The income of the catering industry was 1.9457 trillion yuan from January to June 2018, increased by 9.9% year on year, but dropped by 1.3 percentage points compared with the same period of last year. In June, the growth rate of the industry’s income decreased by 1.8 percentage points year on year.

The calculation of total retail sales of social consumer goods is different from that of final consumption expenditure in China. Final consumption expenditure includes the consumption of both tangible goods and services. The continuous upgrading of residents’ consumption structures has stimulated people’s demands for services and pushed ahead with the consumption of services remarkably. The scale of consumption expenditure of services has also increased rapidly, leading to ever larger gap between the total retail sales of social consumer goods and final consumption expenditure in terms of calculations. In the first half of 2018, the consumption of services such as sports, health and tourism showed a strong momentum for further increase. The residents’ per capita expenditure on sports, medical care, hotel accommodation and transportation increased by 39.3%, 24.6%, 37.8% and 22.8% respectively. As people have a strong desire for comfortable and customer-friendly services, the per capita expenditure on housekeeping increased by 33.1%. Meanwhile, the people also spent more on personal care and on-the-job training while the per capita expenditure on cosmetics, adult education and pre-school courses also saw a double-digit growth.

Consumption is still the most important driver of China’s economic growth. In the second half of 2018, the national consumption is expected to maintain a stable and rapid growth momentum. The government needs to raise residents’ income through more approaches, move faster to upgrade consumption structures, keep on opening wider, vitalize the consumption market and increase supplies to ensure the rapid growth of national consumption.