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Cover Stories Series 2012> A Roadmap for Change> Archive
UPDATED: October 15, 2012 NO. 42 OCTOBER 18, 2012
Golden Harvest
Holiday spending could signal the dawn of a new growth era
By Zhou Xiaoyan

HEADING OUT: Cars flood roads in Dalian, Liaoning Province on September 30, the first toll-free day for passenger vehicles with seven seats or less (LIU DEBIN)

The Chinese economy has many strengths. First, although economic growth has slowed to 7.8 percent in the first half of 2012, recession isn't necessarily coming as 7.8-percent growth is still among the fastest around the globe. Second, wage growth, which has a direct impact on the consumer spending, remains fairly robust. While wages in the first half of 2012 grew 13.1 percent from the year before, though lower than the 14.4 percent from 2011, wage growth actually picked up due to lower inflation. Third, housing prices haven't changed much compared with last year and market expectations predict a recovery in the property sector. Fourth, infrastructure construction has expanded over the past several years, which is bound to have a positive impact on current and future domestic consumption; finally, Chinese consumers have strong confidence in the economy and are willing to spend, said the report.

"The yearly Golden Week allows the whole world to see the enormous potential of the Chinese economy," said Cheng Shi, a macro-economic analyst at the Industrial and Commercial Bank of China.

"The upbeat travel data reflect that the consumption confidence of Chinese families overshot market expectations. The confidence derives from Chinese people's strong anticipation for higher disposable income, for a stable economy and for sustainable economic development," said Cheng.

Consumption is gradually becoming a pillar for economic growth and will continue to be a highlight in the future, said Cheng.

Among the three driving forces for economic growth, domestic consumption has been the strongest and most sustainable. In light of the bigger picture of "sustaining growth," encouraging domestic consumption has become a central tenant in economic development, and the Central Government is preoccupied with how to provide more incentives for consumption, according to a report by the Xinhua News Agency.

The Chinese Government has been trying to rebalance the economy by expanding consumption as a greater portion of the GDP and reducing the nation's reliance on exports in the face of slowing demand overseas. According to Parpart, the upbeat tourism data during the Golden Week should give China's rebalancing ambitions a boost.

"It's a positive signal. Chinese salaries have increased by an average of over 20 percent in the past year and a half," he said. "If some of that now goes to consumption, it is what the government likes to see—an economy less dependent on exports."

In May 2012, the State Council earmarked 36.3 billion yuan ($5.78 billion) to encourage consumption on energy-saving household appliances, efficient lighting products, greener vehicles and efficient electrical machines. Industry insiders predict that consumers will spend over 450 billion yuan ($71.6 billion) as a result.

"The focal point this year is promoting online shopping and credit consumption," said Fang Aiqing, Assistant Minister of Commerce.

Although online shopping and credit consumption are currently in focus, they must be seen as a complement to offline shopping, said Bai Ming, a research fellow at the Chinese Academy of International Trade and Economic Cooperation (CAITEC).

If online and offline spending and credit consumption are integrated, China's domestic consumption could receive a further boost, he said.

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