China’s GDP is expected to rise by around 2.3% by the end of this year, and it is good, considering the flailing economies of other countries amidst this coronavirus pandemic. However, this increase is mainly because of the increased production in the manufacturing sector and is not because of consumer demands. In fact, the problem is that consumer demand has decreased during this pandemic overall in China. This is a matter of concern because although the economy may seem to be on a growth spurt, however, the country tries to rely more on consumer purchases and domestic demand. Now, because of the overall decrease in consumption, the GDP may have increased, even the average disposable income from household savings has also increased, but the country’s reliance on more consumption is still sticking out as a problematic point.
Average Disposable Income
The household income has climbed up, and the average disposable income amongst households also has increased by almost 2.8% in 2020. It is less than the 7.9% increase in 2019, but it means that this year’s disposable income increment has more to do with the fact that the consumers are not comfortable in spending their savings. This is not a very good indicator of retail sales.
The Chinese government has not given any significant financial support to its citizens as the governments of the US and European countries provided. This also added to the overall insecurity amongst the citizens, making them uncertain about their future, and hence, resulting in their low spending and higher saving rates.
But the problem here is that their decreased demand prompted the prices for consumer products and goods to fall too by around 1% since 2019. In fact, the consumer price data that has recently been released reveals a drop in the overall index and sub-index, excluding prices on food products. This drop has never happened since 2009.
Everyone knows that when the consumer prices go low and the consumer purchase is also not high, the economic growth suffers eventually.
On the other hand, the recovery from production lines is quite good, but the CPI fall shows that currently, in China, the demand is slow as compared to the supply.
Pay cuts, high unemployment rate, and increase in e-Commerce are several reasons for the drop in consumer purchases.
At the beginning of the year, many employees saw deductions in their salaries, and a lot of them got laid off too because of the pandemic. The unemployment rate in February was a record high at 6.2%, and now, in October it is around 5.3%. It is still high though.
All these factors have affected the retail sales which have fallen by 5.9% since last year.
The live streaming e-Commerce trends led consumers to buy from items on promotion sales, and this was also an adding factor to the overall phenomenon of decreased consumption and demand. However, these sales contributed to around 7% of the economic value.
More Consumption is Expected in 2021.
It is expected that the GDP will climb up to 9% in 2021, as the retail sales are likely to go up too. A few early signs can be taken from the 4.3% increase in retail sales from October 2020.
I’m Ava Paul, an experienced news website author with a special focus on the entertainment section. Over the past five years, I have worked in various positions of media and communication at World Stock Market. My experience has given me extensive knowledge in writing, editing, researching and reporting on stories related to the entertainment industry.
