A view of Beijing's CBD area on Aug 19, 2022. (PHOTO / VCG)
The contribution of consumption and investment must be doubled if the Chinese mainland wants its economic growth to be at 5 percent this year, suggested Ba Shusong, managing director and chief China economist at Hong Kong Exchanges and Clearing.
This is because the continued hike in global interest rates may lead to significant decline in the mainland’s exports. Without the export engine, the mainland has to rely on private consumption and domestic investment to fuel economic growth at 5 percent for 2023.
Ba believed the contribution of consumption to the mainland economy this year will not be less than 3 percentage points. In particular, during the Two Sessions, it was repeatedly mentioned that the recovery of consumption should be given priority, which is expected to become an important growth engine in the mainland.
Ba Shusong, managing director and chief China economist at Hong Kong Exchanges and Clearing, said the current savings rate in the mainland is relatively high and has continued to increase significantly in the first three months of this year
ALSO READ: Li vows to focus on high-quality growth
“The mainland has just experienced many risks and uncertainties, coupled with the sluggish performance of the real estate market last year, these affect expenditure worth of over one trillion yuan,” Ba said in the Tuesday online forum discussing the growth prospect of the mainland consumption market.
He mentioned that the current savings rate in the mainland is relatively high and has continued to increase significantly in the first three months of this year.
“I believe consumer confidence still needs time to recover. If it fails to recover, the central government's stimulus policy will only turn into excess savings,’ Ba said.
He believed that the size of China's consumer market is second only to the United States, but its contribution to the economy is still low so that the Chinese consumption market has great potential.
ALSO READ: China's stable development boosts global confidence
“However, as each economy responds to the COVID-19 pandemic in different ways, and therefore, the pace of recovery in each country will also vary,” Ba noted.
The consumption patterns of mainland residents have changed significantly after the COVID-19 pandemic, according to Joey Wat, chief executive officer at Yum China Holdings, the mainland’s largest restaurant company which is dual primary listed in Hong Kong and the United States.
“The proportion of digital consumption of some brands has increased from 55 percent before the epidemic to more than 90 percent last year, and the proportion of food delivery business has almost doubled,” Wat said in the Tuesday online forum.
But Wat said that although economic activities and local tourism are gradually recovering, residents' consumption is still relatively cautious. “Business recovers faster on weekdays, while social activities on weekends recover more slowly. I believe that the economy is still facing uncertainty, the recovery is in its early stages, and it may still take some time to recover.”
READ MORE: Premier has full confidence in China's economic outlook
“Since the mainland adjusted the pandemic prevention and control policy, we have seen the gradual release of pent-up demand, the growth momentum of the Lunar New Year is positive, and the flow of people at airports and high-speed rail stations is gradually recovering. The performance is better, but the business has not yet fully recovered to the pre-pandemic level,” Wat cautioned.