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China Pins Hopes on Bigger Spending to Boost Economy

China Pins Hopes on Bigger Spending to Reform Economy
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China Pins Hopes on Bigger Spending to Reform Economy

China has long sought to shift from an export economy to one based more on domestic consumption. There are now signs those efforts are working, partly through incentives aimed at encouraging spending from domestic tourists. Keeping that trend on track is a top priority for Chinese leaders meeting in November.

Beijing’s storied attractions such as the Lama Temple draw increasing numbers of Chinese each year.

During a recent holiday break, one such tourist who identified himself only as Zhou, says he and his family drove 1,500 kilometers from Sichuan to see the Forbidden City and other sights.

“Now we have holidays, time off to spend," Zhou said. "We have our own car and the government waives highway fees. We can save some money to spend for holidays. This is all very convenient.”

While China's domestic spending is rising, families here still spend much less than their counterparts in the West.

Consumer spending still accounts for less than half of the country’s economic growth. In the United States, it’s responsible for more than two-thirds.

Economist Song Hong says as Chinese households grow wealthier, purchasing a car is a tipping point for spending more.

“Many households long to buy a car, and once they meet this need, they then go travel and spend money and enjoy other services,” he said.

Retail sales grew by more than 13 percent in August, the highest this year. During China’s national holidays in October, the country set a new spending record, as some 31 million tourists spent more than $140 billion.

One key challenge is making it easier for Chinese from all walks of life to spend money more regularly. Professor Song says unequal income levels in cities and high saving levels in the countryside remain a stumbling block.

“The problem is in the rural areas where the social system is only now being created and the level of consumption remains low,” he explained.

The Chinese government is trying to encourage more spending through car-friendly policies such as subsidizing fuel during national holidays and waiving highway tolls.

Lan Lan and her friends came to Beijing from the western province of Xinjiang. During their first trip so far from home, they were watching their money carefully.

“We take part time jobs, save money and add in a little pocket money from our families to go travel,” she explained.

As Chinese communist leaders meet in November to outline economic policies for the next five years, they are expected to focus on how to make household spending a driving economic force, much like it is in other countries.