Regulatory obstacles may hinder China's consumer-led growth

A shopper browses canned goods at a supermarket in Qingdao, Shandong province, on Sept 9. The consumer price index rose by 1.3 percent year-on-year in August. [Photo provided for China Daily]

Domestic consumers have explicitly demonstrated their rising power as a key driving force behind the Chinese economy by travelling and spending madly across the country during the weeklong National Day holiday that began on Oct 1.

But some recent confusing regulatory attempts by local governments on issues closely related to consumer enthusiasm indicate that policymakers have yet to fully recognize the necessity of releasing the tremendous potential of Chinese consumers.

According to the China National Tourism Administration, nearly 600million people visited tourist attractions around the country and spent about 500 billion yuan ($74.97 billion) during the holiday, up 12.8 percent and 14.4 percent respectively year-on-year.

Double-digit consumption growth is nothing unusual in this country, but it is remarkable when the world's second largest economy's growth has slowed, to 6.7 percent in the first half of this year, amid huge uncertainties at home and abroad. Because of such strong consumption growth momentum and potential, it is no surprise that some people have even called for the government to introduce more such weeklong holidays.

Clearly, if the country is to press ahead with its economic transformation towards more sustainable consumer-led growth, policymakers should make most of the current consumer enthusiasm with all available means.

A slew of restrictions that local governments have issued since the end of last month to cool red-hot housing markets are a needed effort to dissuade Chinese families from pumping too much of their wealth into the real estate market. Given that almost all the new loans issued by domestic banks went to the property sector in July at the expense of the financing needs of all other economic sectors, it is not hard to guess the huge pressure soaring housing prices are imposing on the finances of those families which have either stretched to buy a new home or saved every penny for the down payment on a property.

Though such efforts to regulate the red-hot property market are not a direct boost to consumption growth, they do not hurt consumer enthusiasm.

But some cities' regulatory attempts to significantly raise the threshold for car-hailing services right after the weeklong holiday can hardly be deemed consumer-friendly.

The transport authorities in Beijing, Shanghai, Guangzhou and Shenzhen, the four most developed cities in China, separately issued draft local regulations on car-hailing services that require drivers to have compulsory insurance, as well as local household registrations and car plates, and put restrictions on the type and age of vehicles that can be used. Some of these regulations are so tough that it is alleged that more than 90 percent of 400,000 drivers who are providing such services in Shanghai will be forced to stop.

As a car-owner in Beijing, I have often left my car at home in favor of a convenient and cost-efficient car-hailing ride. But what has really impressed me is the ability of the car-hailing service providers to respond swiftly to surging demand, as I witnessed when I travelled in other cities during the past National Day holiday. As the world's most populous country, it has long been a case of "people mountain, people sea" at almost every tourist site during public holidays. Many years of failed or unhappy experiences trying to call taxi at those moments did not stop me trying again this year. But although I still failed to call a taxi on several occasions, I was able to get the transport I required through online car-hailing platforms, which made this year's holiday much easier than expected.

However, such convenient transport may come to an end soon if the draft laws are introduced.

As travel and tourism become an increasingly bigger part of consumption-led growth, policymakers should tilt the regulatory seesaw in favor of, not against, Chinese consumers.

The author is a senior writer with China Daily.

zhuqiwen@chinadaily.com.cn