China Focus: New consumption mode, new growth engine

BEIJING, June 23 (Xinhua) — Against the headwinds towards China’s economy, new ways of consumption empowered by development of Internet Plus is likely to become the country’s new growth engine.

China’s economic growth slowed to a six-year low at 7 percent in the first quarter of 2015 while it has been seeking ways to shift its growth away from a dependence on investment and export to domestic consumption.

The latest data showed that China’s retail sales growth accelerated in May, indicating that its pro-consumption policies launched recently have begun to take effect.

The National Bureau of Statistics reported that retail sales in May grew 10.1 percent year on year to 2.42 trillion yuan, a tad up from the 10 percent growth recorded in April.

More importantly, online shopping took a larger share in total consumption. In the first five months, online sales rose 39.3 percent year on year to reach 1.34 trillion yuan.

Internet Plus is an idea that combines mobile Internet, cloud computing, big data, Internet of Things, modern manufacturing industries, e-commerce, industrial Internet and Internet finance.

Besides buying consumer goods and ordering food, Internet Plus has also penetrated in all aspects of life, such as transportation, traveling, medical care, entertainment and education, and the new consuming experience has stimulated the potential of consumer spending.

In a bid to further spur demand from middle and low-income earners, the State Council, China’s cabinet, said on June 10 that private capital, foreign and domestic banks and Internet companies will be allowed to set up “consumer credit” firms, which can offer small loans to the public.

Compared to traditional loans offered by banks, loans designed specifically to fund retail purchases are generally small and without the need of guarantees. Such loans are especially handy for people who are either denied of credit cards by banks or whose cards have low credit lines

The move is widely expected to effectively expand domestic consumption and help China’s economy shift to a consumption-driven economy as “borrow to consume” are now more acceptable to Chinese consumers and China’s credit information system is further completed.

China’s e-commerce giants such as Alibaba, JD.com and Suning have already launched similar services, which give consumers access to loans to buy goods on their online shopping sites and the money could be repaid in installments.

Moreover, China has slashed import duties on consumer goods by an average of 50 percent, starting from June 1, which is another move to encourage domestic spending. The duty on cosmetics was reduced to 2 percent from 5 percent.

China’s State Council has also released a guideline on June 20 saying the customs administrator will streamline customs procedures for e-commerce exports and imports to make the processes simpler and quicker, while the quality supervision authorities will allow collective declaration, examination and release of goods.

The government will keep export taxes low while formulating import tax policies. It will also encourage domestic banks and institutions to launch cross-border electronic payment businesses and advance pilot overseas payments in foreign currencies.

However, experts note that some of the policies and regulations in China have fallen behind the development of the new consumption mode and they suggest the government should continue to improve consuming environment, upgrade consuming infrastructure, strengthen regulation and further open domestic market. Enditem