Macroscope | As China’s economy slows, can consumers pick up the slack?

Despite a slowdown, the economy can still level out at around 6 per cent growth in the next few years

But Beijing needs to keep consumer confidence pumped up with more fiscal stimulus if it wants consumers to lead a growth surge

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People throng a shopping area in Shanghai on July 12. Retail sales growth might have slowed, but underlying consumer confidence remains strong. Photo: Reuters

Published: 2:30pm, 30 Aug 2021Updated: 3:51pm, 30 Aug 2021

China’s economy is slowing. Industrial production and retail sales growth have both decelerated sharply in recent months, so which sector could be the swing producer of extra impetus in Beijing’s drive for faster homespun growth?

Can China’s consumers take up the slack and lead domestic demand to higher ground or will the economy slip back into its old ways, with export-led growth making up the difference? Beijing is counting on consumers to make a bigger mark on the economy, but it’s not going to happen spontaneously.

With lower domestic interest rates probably ruled out by tougher policies coming soon from the US Federal Reserve, Beijing needs to keep consumer confidence pumped up with more fiscal stimulus and extra deficit spending.

The economy can level out at around 6 per cent growth in the next few years but Beijing needs to go the extra mile to make the difference.

Clearly, there has been a significant loss of economic momentum over the past two quarters but nothing more serious than an unwinding of the distortions caused by the Covid-19 pandemic, which has driven domestic business activity into disarray.

Year-on-year GDP growth in China has slowed from a peak of 18.3 per cent in the first quarter of the year down to 7.9 per cent in the second quarter, but this is still well above the five-year moving average of 6.3 per cent, which is probably more indicative of China’s underlying growth rate.

.css-1m2rp1p{color:#34b8b5;}Macroscope | As China’s economy slows, can consumers pick up the slack?

Macroscope | As China’s economy slows, can consumers pick up the slack?