China eyes 50 trillion yuan in retail sales by 2025, but external uncertainties put onus on domestic consumers to spend

With the future shrouded in uncertainties, new five-year document says domestic trade must play an increasingly important role in shoring up national economy
Document tasks 22 state departments with helping to establish a strong domestic market to counter turbulent external environment

China's economic recovery

Wendy Wuin BeijingandOrange Wang

Published: 8:30pm, 31 Dec 2021

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China is expecting to see about 50 trillion yuan (US$7.85 trillion) in retail sales by 2025 as Beijing intends for consumption to play the role of a “ballast stone” to counter external headwinds, according to a five-year document released by multiple authorities on Friday.

A key gauge for the nation’s consumption, retail sales totalled 39.2 trillion yuan in 2020 but failed to meet the target of 48 trillion yuan that Beijing set when it released its previous five-year plan in 2016.

The new document, which outlines tasks to boost domestic trade from 2021-25 for 22 state departments, including the National Development and Reform Commission, the Ministry of Commerce and the People’s Bank of China, also said there was an urgent need to establish a strong domestic market to counter the turbulent external situation.

“The international political and economic situation is complex and changeable, the uncertainty and instability has obviously increased, and the impact of the Covid-19 epidemic situation is extensive and profound,” it said, detailing external risks.

“The world economy is in a downturn; economic globalisation has encountered headwinds; traditional and non-traditional security threats are intertwined and rising; the world has entered a period of turbulence and reform; and the security and stability of industrial chains and supply chains are facing major challenges, so the role as a ‘ballast stone’ and ‘stabiliser’ of domestic demand has become more prominent,” the document added.

“It is urgent for us to improve the quality and capacity of consumption, to unleash the potential of domestic consumption, and to build a strong domestic market.”

With the future shrouded in uncertainties, the document also noted that domestic trade will play a more important strategic role in shoring up the economy. It specifically pointed to new opportunities resulting from China’s technological revolution and industrial upgrades.

“Opportunities to develop domestic trade are unprecedented, while challenges are unprecedented,” it said.

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China 2021 Year in Review

In setting the 50-trillion-yuan retail target for 2025, China anticipates online retail sales will account for 17 trillion yuan of the total.

China announced a so-called dual-circulation strategy last year to increase focus on the domestic market and rely more on indigenous innovation to fuel growth. But top leaders have also repeatedly said that China will continue opening up, and that the strategy does not mean China will completely close itself to the outside world.

The new five-year plan also said China intends to attract foreign capital to invest in the domestic trade sector by leveraging its “extra massive” market potential in the country, such as by introducing high-quality products, advanced technology and management expertise.

Its economy started to lose steam in the second half of 2021, with growth slowing to 4.9 per cent in the third quarter, year on year. Some analysts say growth may have further decelerated to 4 per cent in the fourth quarter.

Beijing has been sounding the alarm on strong economic headwinds – demand contraction, supply shocks and weakening expectations – in the coming year, and it has started unveiling policies to stabilise exports and boost consumption.

Retail sales rose 3.9 per cent in November, year on year, but the rate was slower than the 4.9 per cent increase in October. The Ministry of Commerce has said it will unveil new measures to stimulate consumer spending.

There are also plans to strengthen and build up China’s digital infrastructure, including 5G, the internet of things, and artificial intelligence, while encouraging rural consumption and boosting the silver economy.

More efforts will also be made to improve anti-monopoly regulations and ensure fair market competition.

The five-year plan also calls for the strengthening of reserve and emergency supply systems, while beefing up resistance to shocks in the global supply chain.