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Two Sessions 2021
EconomyChina Economy

China’s weakened consumer spending leaves ‘a lot of work to do’ in driving economic growth

  • Policies are needed to improve livelihoods and support low-income earners, or analysts say China’s new plan to rely on domestic consumption could fall flat
  • Household debt has risen rapidly in China as more consumers turn to loans to make ends meet in times of economic hardship

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Chinese state media say at least 3 million shops and restaurants in China were forced to close or had their licenses revoked in the first 11 months of last year. Photo: EPA-EFE
Jane Cai

At lunchtime on a recent weekday, Gu Zekun removed signboards at his small restaurant inside a Beijing shopping centre.

After struggling for more than a year in the throes of the coronavirus pandemic, Gu had no choice but to shut down his roast duck roll business.

“Fewer people came here amid the coronavirus. Many shops have closed since last year,” Gu said, pointing to closed doors in an adjacent area that was previously occupied by small restaurants and shops. “We sold rolls at around 30 yuan (US$4.60). Many customers frowned at the price. They were reluctant to spend.”

Gu’s restaurant is among the countless Chinese businesses that collapsed amid lacklustre consumer spending last year. According to Banyuetan, a magazine run by state news agency Xinhua, at least 3 million shops and restaurants on the mainland were forced to close or had their licenses revoked in the first 11 months of last year, citing data from Qcc.com, a corporate credit information provider.

Chinese retail sales – consumer spending on goods – shrank 3.9 per cent last year from a year ago, marking the first annual decline since 1978. While gross domestic product (GDP) expanded 2.3 per cent and made China the only major economy in the world to post positive growth last year, it was mainly driven by infrastructure investment and exports.
While many economists expect Chinese consumer spending to rebound when the pandemic is over, there are widespread concerns that it will be an uphill battle for the nation to increase the share of private consumption in GDP over the long run, given that the wealth gap has increased significantly in the aftermath of the coronavirus.
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