China unveils new measures to boost consumption in counties, smaller cities | World News

China on Tuesday rolled out a series of measures to boost consumption in its counties and smaller cities to revive sluggish domestic demand, which has become a major source of its economic slowdown.

The measures herald a policy shift to boost domestic demand from top cities and tap the potential of vast lower-tier markets as a new source of economic growth, an official announcement here said.

The government calls for upgrading consumption channels in counties, including renovating township commercial centres, rural markets and local fairs.

It includes encouraging domestic and international brands to open regional debut stores and promote the revitalisation of existing land resources to improve services, according to the guideline issued by the Ministry of Commerce.

The lower-tier markets, generally referring to third-tier and smaller cities, counties, townships and rural areas, account for about 70 per cent of China’s population and 60 per cent of total retail sales of consumer goods.

The guideline urges better services that cater to the elderly and children, more efficient urban-rural distribution networks, and stronger county-level employment. It also includes more channels for residents to increase their incomes, state-run Xinhua news agency reported.

The measures come as China seeks to give domestic consumption a bigger role in driving economic growth and to reduce over-reliance on exports as part of its efforts to rebalance the economy.

China’s GDP shrank to 4.3 per cent in the second quarter, the softest quarterly expansion since late 2022, down from five per cent in the first quarter.

Despite its economic heft, China’s household consumption remained around 40 per cent of its GDP in comparison to India’s 60 per cent, USA’s 68 per cent, the UK’s 62 per cent and Japan’s 55 per cent, according to International Monetary Fund data.

The ruling Communist Party is concerned over the slowdown as China’s economic performance becomes increasingly uneven, with growth supported by exports while domestic consumption is constrained by the real estate downturn and persistent labour market weakness.

The imbalances continued to deepen in July. According to data released by the National Bureau of Statistics (NBS) on Monday, retail sales, a major gauge of consumer spending, grew by just 0.6 per cent due to sluggish retail sales and a fixed-asset investment slump, highlighting persistent weakness in domestic demand.

China’s retail sales fell to 0.6 per cent in May, the lowest since China lifted Covid-19 lockdowns in 2022.

The NBS reported that property investment, a persistent drag on economic growth, fell 19.2 per cent in the first seven months of the year, compared with a fall of 18 per cent between January and June.

China’s slowdown was driven by falling private sector and fixed-asset investment long-time pillars of China’s growth model, wrote columnist Wang Xiangwei in his recent column in the Hong Kong-based South China Morning Post.

“For more than three decades, economists at home and abroad have urged China to rebalance its economy by shifting away from reliance on exports and infrastructure investment. Beijing has periodically rolled out stop-gap measures to spur domestic demand, but consumer sentiment remains fragile not least because household wealth is heavily concentrated in property, where prices have been falling,” Wang said 
“Many economists have called for Beijing to do more to stabilise property prices, which would rapidly bolster consumer sentiment, but China’s policymakers have remained unmoved,” he said.