China sets goal to become a consumer economy
Editorial 2012-12-20 08:44
An auto show in Jinan, Shandong province. The car market has been one clear area in which China's public has demonstrated its new-found spending power. (Photo/Xinhua)
China's top economic priority for 2013 is to transform itself into a consumer nation, an emphasis reflected in the policy shift announced at the recently concluded annual Central Economic Work Conference.
(The country) must hold on to the strategic basis of expanding domestic consumption, said a statement released after the annual conference. This is a departure from the past, when the government has aimed at creating economic growth on three bases — investment and export as well as domestic consumption.
The Communist Party's new secretary general, Xi Jinping, stated during the conference that the country can no longer rely on exports and investment but should concentrate on boosting domestic consumption and changing the way the country's economic growth is generated.
It was also indicated during the conference that the country needs to cultivate consumption growth points in order to enhance the role of domestic spending in economic growth.
Beijing has introduced several measures to encourage domestic consumption during the past year, including the People's Bank of China's move to slash credit card transaction fees and the government lowering trade tariffs.
These measures have helped ensure rapid growth in retail sales of consumer goods, reflected in the 14.2% increase during the first 11 months of this year, which was a faster rate of growth than the expansion reported in GDP or growth in imports and exports.
Meanwhile, following earlier calls made by Vice Premier Li Keqiang last year, the Chinese leadership also agrees that the country's urbanization is the greatest potential driver of domestic consumption.
However, China still needs to overcome several hurdles on the path to becoming a consumer economy, including bringing its social security system up to speed, as the current system encourages people to save for a rainy day rather than spend more freely. Additionally, the country needs to find new growth points to boost consumption since it has already tapped into growth drivers such as the real estate market and the auto sector.
China should also establish a comprehensive legal framework for the consumer market to help break foreign brands' dominance of the upper end of the market while local brands control the lower end.
Taiwanese businesses have an advantage in tapping the opportunities offered by China's economic transformation, given their experience and similar cultural background. But Taiwanese businesses still have to brace themselves for stiffer competition from both Chinese and foreign rivals after China opens up its economy more fully to the rest of the world.
