China’s Domestic Consumption Unlikely to Pick Up Despite Push For Internal Demand: Expert

China’s economy will now rely less on exports and steer toward the domestic market, Chinese leader Xi Jinping said at the 20th Congress of the Chinese Communist Party (CCP) on Oct. 16.

“We will make sure that our implementation of the strategy to expand domestic demand is integrated with our efforts to deepen supply-side structural reform,” Xi stated.

Jointly published by several Chinese state-owned newspaper groups, The Beijing News said that “China, the world’s largest developing country, shall not let its economy rely primarily on international demand.”

Yao Jinyuan, the former chief economist of China’s National Bureau of Statistics (NBS), told The Beijing News that domestic demand includes investment and consumption. And although the Chinese government had talked about expanding domestic demand for more than 20 years, what had been done was limited to investment.

In 1998, the Chinese government invested heavily in housing and automobiles. Ten years later, in 2008, it started the “four trillion yuan to boost domestic demand” scheme by investing heavily in significant infrastructure, such as railroads, highways, and airports.

Yao said that for a long time China had relied on significant investment to stimulate domestic demand, resulting in some over-expanded capacity coupled with issues of low supply efficiency and supply imbalance.

He added that the CCP would use consumption to boost the economy after the 20th Party Congress.

On the other hand, the NBS data showed that consumption in China shrank in the first half of 2022, with a 0.7 percent year-over-year (YoY) decrease in the total retail sales of social consumer goods.

But according to the NBS data released on Oct. 24, the country’s total retail sales of social consumer goods had somehow recovered 0.7 percent YoY in the first three quarters.

Domestic Consumption Unlikely to Pick Up: Expert

Albert Song, a senior financial analyst and expert on the Chinese financial system, told The Epoch Times that China’s economic data should be for reference only.

“China’s economy continues to decline, and financial risks are increasing. In the first two quarters, the CCP’s zero-COVID policy severely damaged the economy, and the downturn exceeded any expectations and triggered widespread panic,” Song said.

“In the third quarter, the Chinese regime continued sticking to its zero-COVID policy, and local governments still enforced lockdown measures for the sporadic outbreaks. Under the name of maintaining stability for the 20th Party Congress, the CNBS had to work overtime to polish the data.”

Song said in the second quarter, Chinese Premier Li Keqiang convened a meeting of over 100,000 party officials, asking all levels of government to act urgently to save the falling economy. Li also released many measures in an attempt to stimulate the Chinese economy, which might be one of the factors accounting for the GDP growth in the third quarter.

However, Song urged keeping in mind that the CCP’s economic data is “always inflated and should be for reference only.”

Considering the regime’s zero-COVID policy and the widespread debt defaults in China, Song predicts that the Chinese domestic demand will not pick up as the CCP expects.

“The CCP reorganized the State Council to change the economic policy. However, its political system is incapable of fostering the so-called reformists. Anyone holding an expectation will likely be disappointed,” Song said.

Song has worked in the Chinese financial sector for 27 years. He is also an expert in China’s politics and economy.

“China is the world’s largest consumer market, and it is a correct approach to let consumption lead its economic growth. However, the country’s household debt level is at the warning line. Most families’ assets are real estate with mortgages. Hence, the domestic demand is unlikely to pick up considering the current debt pressure and zero-COVID policy,” Song added.

According to NBS data released on Oct. 25, China’s real state market, where most Chinese families hold assets, continues to worsen. The country’s property investment growth rate dropped 8.0 percent YoY in the first three quarters.

In a press conference on Sept. 16, Fu Linghui, director of the department of Economic Statistics at NBS, said that the property market was “currently still on a decline.” The data at the time showed the property investment growth rate had already fallen 7.4 percent YoY in the first eight months. Now the YoY decline has increased by another 0.6 percent.

China’s National Real Estate Climate Index (NRECI) also showed a continued decline since 2021, from 100.97 last July to 94.86 in September, except for a slight rebound of 0.08 in February.