A topic that has been hinted at before by leading Chinese economists like Huang Yiping: now, a bigger policy effort is being announced to strengthen the role of domestic consumption as a driver for the post-pandemic economy.
Ahead of the Central Economic Work Conference (CEWC), the CCP’s annual top-level gathering for next year’s economic policy priorities, the Central Committee together with the State Council on Wednesday this week released the “Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035)” (扩大内需战略规划纲要(2022-2035年)).
The document that lays out the vision and key tasks for the current Five-Year Plan period (until 2025) and up to 2035 contains 38 items in 11 sections. Five key observations are:
Past achievements of economic reforms, such as a rate of final consumption (i.e. both private and government consumption) of above 50% of GDP, are recognized
The document at the same time points out that to solve the Party’s principal contradiction between the people’s growing need for a better life and unbalanced and inadequate development, the expansion of domestic demand is an “inevitable requirement” to deal with the “profound changes in the international environment” – i.e. Covid, more global uncertainty, but also “unilateralism”, “protectionism”, or “hegemonism”
On the way there, China still faces several constraints and challenges, among them institutional constraints on land, labor and environment that hamper investment, several forms of inequality or financial risks, which constrain the development of a “complete domestic demand system” as part of a “strong domestic market”
Policies strengthening “common prosperity for all” are a central element of the plan and will be an “important feature of Chinese-style modernization”, with incomes that shall rise in lockstep with economic growth, as well as a more refined redistributive system including taxation for high-earners, or a housing system still centering on the principle of “housing is for living in, not for speculation”
To strengthen consumption, new types of consumption such as tourism, sports, health or online consumption shall be strengthened, the institutional framework for the “fair and unified market” shall be further reformed, and investments into the respective production capacity and infrastructure shall ensure the well-functioning of this “large market” as part of the country’s overall ‘Dual Circulation’ framework
We will analyze this new policy push in more detail in January, together with the economic policy priorities that the CEWC are currently deliberating for 2023, which will both inform policymaking to be presented at the next National People’s Congress (NPC) taking place in March next year.