Economists urge Chinese local govts to target consumption to drive growth
Liu Qiao, Dean of the Guanghua School of Management at Peking University, told a media event on Thursday that certain provinces could look at consumption growth or the increase of household disposable income to drive their economies.
"I think this would send a message. China needs to have a different growth approach, and it's time to give it a try," said Liu, who is also policy adviser to Beijing.
Local governments have long used infrastructure investment and land sales to grow their economies, but both now face constraints.
Commerce minister Wang Wentao said on Friday that China faces a complex situation during the next five years.
"We will roll out targeted measures as the situation evolves, to further spur the momentum of goods consumption and release the potential of services consumption," he said at a press conference.
Wang estimated China's annual retail sales would surpass 50 trillion yuan ($6.97 trillion) by the end of 2025.
Government advisers have been stepping up calls to make the household sector's contribution to the economy a priority in Beijing's 2026-2030 five-year plan. Top leaders are currently gathering proposals and the plan is expected to be approved by parliament in March.
The world's second-biggest economy grew 5.3% in the first half of the year despite concerns about sweeping U.S. tariffs. But economists are worried about deepening deflationary pressure.
"Deflationary pressure is the biggest concern of the Chinese economy and China's policy in the short term," said Yan Se, deputy director of the Economic Policy Research Institute at Peking University.
Yan said that while monetary policy could offer a quick solution, the key was to improve people's welfare.
"Why don't we raise the salary? Why don't we raise the unemployment insurance? That will help not only to fight the deflationary pressures, but also help the Chinese economy to transition from a traditional manufacturing sector driven growth into a new quality productive force driven economic growth."
($1 = 7.1772 Chinese yuan renminbi)
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