An elderly lady visits the 10th China International Senior Services Expo in Beijing on May 21, 2024. The expo features domestic and international elderly care service brands, smart elderly care information technology, age-friendly equipment and supplies, etc. Photo: VCG

China's economic structure should be more tilted toward the services sector. Meanwhile, more products and services from the supply side should be provided to boost consumption, a top economist has said.

Currently, there is a lack of supply, which has dampened consumer demand. Meanwhile, there is a deep structural change in consumption patterns in China, Zhu Min, vice-chairman of China Center for International Economic Exchanges, said on Tuesday during a panel discussion themed "Reinvigorating Consumption" at the Annual Meeting of the New Champions, also known as Summer Davos.

Zhu cited three reasons behind the structural change.

First, China's per capita GDP has passed that of a low-income country, which means that the country's consumption rates have changed dramatically, because people are moving to the advanced consumption - education, healthcare, entertaining, tourism, which are service-oriented, rather than the basic needs and basic consumer goods, such as clothing, transportation and housing.

"We consume fewer goods, because physically we can only consume limited goods. However, the healthcare and all those [services] sections will boom," he said.

"The second is aging. I consume less material goods when I get older. I have worn my suit for 10 years and I'm still wear it. Aging is a big change. The third reason is an interesting consumption pattern only in China: the young section, from newborns to roughly 20 years old, consume a lot, which in fact is the highest consumption period for Chinese people," Zhu said.

I have never observed the same thing anywhere else in the world, Zhu noted.

"But now the birth rate is falling. The whole [young] section of the population will shrink. Thus, we need a boost in the middle sector - from age 20 to age 60. They have to consume more. 

"The key issue is that China needs to provide more consumption goods to this portion of the population. Developing a consumption bundle for this portion of the population becomes ever important, as they are the future consumption power for the whole society," Zhu noted.

However, Zhu pointed out that people aged 20 to 60 in China are not served with proper consumption options.

Zhu called for more focus on policy to adapt to the structural change in consumption, and to stimulate the service sector development. Zhu also noted the importance of improving supply side dynamics to convert the household savings of about 145 trillion yuan ($19.9 trillion) into real consumption power.

At present, China's deposit balance stood at nearly 300 trillion yuan, of which 145 trillion yuan are household savings. Household deposits increased by 9 trillion yuan in the first five months of 2024, and increased by nearly 60 trillion yuan in the past three years, according to statistics from the People's Bank of China, the country's central bank.

Zhu said that the increase in the savings from household is a real concern, which reflects two things: The consumption desire is not very strong. And the supply did not meet the demand. The two sides played equally important roles.

"Over the past 20 years, China's consumption of goods actually remained pretty high, accounting for 31 percent of GDP, even higher than [that of ] the US. The Americans consume only 27 percent of GDP on goods, but they consume 44 percent of GDP on services," said Zhu, noting that China should upgrade the supply side to provide the service consumption bundle to consumers.

"I do confidently feel that China has a huge potential to boost domestic consumption, because of the [potential in] services consumption, the development of consumption, which are the key areas to grow," said Zhu. 

Global Times