Editorial | Boosting consumption an economic priority in new five-year plan

The pandemic continues to define national and world affairs, including in China, even though it has emerged from it to lead a global recovery. As a result the whole world was watching with a degree of anticipation and trepidation as Premier Li Keqiang took media questions on China’s economy after the annual “two sessions” of the national legislature and political advisory committee.

In line with uncertain times, China has set a cautious growth target of “above 6 per cent”, a guide to expectations which leaves room for more but does not promise it. To put it into contemporary perspective, Li pointed out that the projected increased output value of 6 trillion yuan (HK$7.16 trillion), if applied to the value of total output at the beginning of the 13th five-year plan in 2016, would have represented a growth rate of nearly 8 per cent. However, notwithstanding the turnaround from a rate of a mere 2.3 per cent last year, he said China still needed to consolidate the economic recovery.

A relatively modest target projects a determination to maintain smooth growth and avoid volatility in markets, especially in the employment sector, which is key­ to the overriding goal of social stability amid uncertainty surrounding global economic growth and development. Li emphasised the importance of achieving job security. In a country so big and diverse, that will be no mean feat.

More specific goals are to be found in three areas that are key to President Xi Jinping’s long-term development vision to 2035. They are research and innovation, environmental protection and pollution, and social welfare and livelihood. In pursuit of a hi-tech development model, budgeted spending on research and innovation, for example, is set to grow this year by 10 per cent, and then 7 per cent annually.

Ultimately, China’s stable development towards the goal of a “moderately prosperous society” depends on Xi’s concept of a “dual circulation” economy, in which domestic consumption shoulders a lot of the growth presently generated by manufactured exports. This calls for massive expansion of China’s middle class and narrowing of a yawning wealth gap.

Li’s work report at the opening of the two sessions acknowledged that “residents’ consumption is still restrained”, while vowing to stabilise and expand consumption. Boosting domestic consumption is an economic priority in China’s five-year plan to 2025, a full draft of which is expected to be revealed in coming days. It is easier said than done. As Peking University economist Liu Xiao has said, rightly, if consumption is to become the backbone of China’s economy, it is urgent to address the issue of how to make it a driving force.